China Tells Bernanke To Take A Hike

Graham Summers
9 December 2010

Over the last few months, I've noted that the most important monetary relationship in the world is that between China and the US, the world's largest creditor and debtor countries respectively.

Both countries' central banks engaged in a money-printing orgy to counter the Financial Crisis in 2008. Now they're butting heads on the consequences of their actions: the US Federal Reserve wants to create inflation, while China wants to aggressively halt it.

This is IT, the #1 dynamic for the financial markets going forward. How this plays out will impact everything from the US Dollar's reserve currency status to where the stock markets will head.

With that in mind, we need to consider the power dynamics between these two countries from a monetary perspective.

China has made it clear that it is NOT pleased with the US's current monetary policy (China has blamed the Fed for its inflation woes with some officials going so far as to label the Dollar's status as a reserve currency, "absurd").

The US has in turn responded by labeling China a currency manipulator and blaming it for the US's economic woes. Indeed, it seems almost every other week that some US Government official comes out with a "it's ALL China's fault" statement.........read on