What the price of tea in china has to do with silver and gold
There was a report out today about the price of food in China. It was pretty shocking. Over the past ten days, prices n a number of foods throughout china have gone up by double digit percentages.
The oval average increase was 4.6% over the past 10 days. In case that sounds small, let me emphasize that this is a HUGE increase over such a small period of time. Now it is true that this was just an isolated sample, and the rate of price increase will probably revert to its mean, but that’s not what matters for gold and silver.
What does matter for gold and silver prices is that when price shocks like this start occurring, people lose confidence in the government run money. They turn to gold and silver as commodity money that holds its value instead.
What happens when the largest precious metals consumers get spooked and want to hold on to their wealth? They buy gold and silver. Silver especially since it is so much cheaper than gold.
Chalk up another point for the bull case for commodities, especially gold and silver.
As to why Chinese inflation is going so fast, it has to do with the trade relationship the Chinese government establishes with the exporters in China. The Chinese government prints enough money to keep the yuan weak versus the dollar. That way Chinese goods remain cheap for Americans (and everyone else too) to buy. Great for the chinese exporter, lousy for the other Chinese people. This is now backfiring because the US (and everyone else too) are printing more and more money, so the Chinese government is following suit.
–from the iPad