Does Chinese Money Matter?

I once wrote an "Ode to Chairman Volcker" which observed that money matters, especially regarding inflation and interest rates.

Economic activity has been perking up in the latter part of 2009, partially as a result of pent-up demand and partly as a result of monetary stimulus a year ago.  However, U.S. stimulus efforts seem to be flagging.  Money growth in the U.S. has slowed markedly.

In China, however, money growth has taken off like a rocket.  There will surely be consequences.  In the short run, Asian economic activity may be sustainable - at least until inflation takes off in the emerging markets and force the hand of the Chinese government to take measured steps to slow the growth in money supply, at which point the boom may come crashing down. 

This is just another interesting fact to add into the global investing mix --- as if it weren't already interesting enough!

Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies.

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