Hyperinflation in China and India is real – higher interest rates and evaporating FDI will lead to collapse in the economic growth- what is the effect on Dow
Peter Oberois
Mar. 12, 2007

The great depression of Asia especially in China and India between 2007-2015 is what the analytic models predict. The quantitative models point to cycle tops in both Chinese and Indian economies.

But is something really happening to confirm such a cataclysmic event? People are bullish on Indian and Chinese economies. The business confidence is high in both the countries and common people are buying stocks like never before.

However, in both India and China, there are seeds of hyperinflation. The prices are rising sharply in the overheated economies. Hyperinflation in China and India is real. China's inflation accelerated in February, adding pressure on the central bank to raise interest rates in the world's fastest-growing major economy. Consumer prices rose 2.7 percent from a year earlier after gaining 2.2 percent in January. In India, the inflation is actually accelerating even faster. Official rate of inflation in India is higher than 6% and is rising very fast.

Both Chinese and Indian Governments are concerned about fast rising inflation. They can only raise the rates to check the growth. But the biggest problem is that higher rates will decelerate global economies. That in turn will reverse flow of Foreign Direct Investments.

Now, the picture is somewhat clear. The seeds of great depression of Asia are there. By 2015 both of these emerging superpowers will be reeling under depression. The scenario after bubble bursts is nasty.

What is the effect on Dow and commodities?

Dow will be dragged lower no doubt. The pressure from the emerging economies will be enormous. The reason is that the large companies have based their plans on penetrating and pushing goods and services in the emerging countries. Commodities will also decline in price after a cycle peak.

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