Mark Faber: China and India have inflation rates from 8-15%

Mark Faber, who is publisher of the Gloom, Boom and Doom report interviewed with Bloomberg and has very interesting take on Chinese and Indian inflation. 

There are other interesting tidbits in here as well like, equities are the place to be for the next ten years, and precious metals are overbought. 

But what most interests me is the report of Chinese and Indian inflation.  When it comes to economic reporting, don't rely on the official reports coming out from the government. 

Even in the United States, we report inflation assuming that everyone rents.  The figure that they use is Owner Equivalent Rent.  They interview homeowner occupants and ask, if you had to rent your house, how much would you charge?  What happens is that it totally discounts the purchase price of the home in the official inflation figures.  Others have reported calculated the inflation based upon Case Shillers price index and showed much higher inflation during 2000s.  . 

Argentina's official inflation rate at just over 11% is less than half of what it has been estimated to be

The inflation rate in China was last reported at 3.60 percent in September of 2010, climbing at the fastest pace in two years. However, there are signs that inflation is really much higher.  Inflation is as high as 50% on apparel, 20% on food, as reported by Business Week.  And for these developing economies, Food and apparel eat up a larger percentage of income than they do in developed countries. 

Chinese and Indian inflation is likely between 8% and 15%, which is much higher than the 3.6% reported by the Chinese gov't. 

Many are wondering on how China could have such benign inflation given its blistering growth in wages. Many consumers, investors, analysts, and academics disagree, via BW:
"There has been a jump in prices that isn't reflected in the numbers," says Chinese Academy of Social Sciences economist Yu Yongding, who formerly served as an adviser to China's central bank.

...Another sign of rising prices: Multinationals in China expect to hike wages an average of 8.4 percent this year, according to human resources consultant Hewitt Associates (HEW). Ordinary Chinese, meanwhile don't see the steep jumps in their housing, education, and medical expenses reflected in the official stats.
Via Nasdaq:
There's also another indicator--growth of money supply--which has a proven strong correlation with inflation. China's money supply, M1 and M2, has expanded by 56 percent and 53 percent respectively over the past two years. Currently, with the various tightening measures, both money supply figures are still growing at an annual rate of about 20 percent, based on Bloomberg data
Furthermore, the continuing massive rural-to-urban migration will likely keep pushing up rents and food prices, just to name two of the many categories, and wages are expected to rise around 8 percent this year.


What is China's real exchange rate?
How Owners Equivalent Rent duped the Fed
China's M2 gaining over 20%
Indian Food inflation declines to 13.75%
Argentina's inflation is the third highest in the world


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