China Central Bank Sees Dollar Strength, Global Inflation

China's central bank said on Friday that it expected the dollar to strengthen this year, but it raised the specter of worldwide asset bubbles and inflation.

In a lengthy report on the global financial markets, the People's Bank of China also warned that huge, hidden bad bank loans in the West could pose a threat to the global economy.

While the dollar is likely to rebound this year if the Federal Reserve raises interest rates earlier than other major economies and sovereign-debt problems in the euro zone persist, huge U.S. fiscal and trade deficits could limit its gains, the report said. "Therefore, even if there is a rebound in the dollar, the rebound will be not be too strong," the report said.

The central bank said the ultra-loose monetary policies, including quantitative easing adopted by major central banks, had pumped huge liquidity into the global financial markets.

"Once the real economy turns better, the massive liquidity being released out will definitely add to inflationary pressure," the bank said. "It is an urgent task faced by central banks in the world to avoid the forming of asset bubbles and inflation."

"We cannot rule out that the recovery process may reverse due to the exit of expansionary monetary policies," the People's Bank of China said in its 2009 International Financial Markets Report.

While the dollar is likely to rebound this year if the Federal Reserve raises interest rates earlier than other major economies ....

"If" is such a wonderful word. If the Moon is made of green cheese .....

The Fed is about as likely to raise interest rates as the Moon is to be made of green cheese. Raising interest rates right now would almost certainly add another business-killer to the mix (by making it harder for businesses to get the credit they need, including credit to cover their accounts receivables until their customers pay them), which will in turn cause unemployment to spike even higher, which will turn an already dire Fall election into a total rout for the fascists, I mean democrats, and consequently the Obastard administration is going to order the Fed to keep interest rates low in hopes that the continued flood of "free" money will keep the stock market going and they'll just keep their fingers crossed that the inevitable asset-bubble bursting won't happen until after the elections are over.

Nixon tried precisely the same trick for his re-election, too, with similar results.

China's central bank said on Friday that it expected the dollar to strengthen this year, but it raised the specter of worldwide asset bubbles and inflation.

Yes. Their own...

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