The Problem with Communism and Inflation

China, inflationThe US government may have a difficult time convincing China to import many of our products but it seems the communists have inadvertently decided to access one of our biggest economic headaches – inflation. Food prices are rising, to be precise. That’s right, Chairman Mao, welcome to good old inflationary times, American style. The thing about communism, at least when it’s practiced like the Chinese do, is that the government tightly controls the price of everything, which is the only way to keep the average underpaid wage earner from revolting.

But with the influx of western businesses like McDonald’s, and a incremental loosening of the economy’s reins, suddenly the Chinese rulers have an issue on their hands they’ve never had to worry about before. While American food prices have skyrocketed in recent months, China’s not faring much better, having witnessed a 10% overall rise in food cost in the past month and a 20% spike in fruits and vegetables. And horror of horrors, the ubiquitous burger and mystery meat chain, McDonald’s, has announced certain price increases will take effect in all their stores. For instance, expect a $0.15 hike in the price of Chicken McNuggets everywhere.

Some experts are predicting severe food shortages around the world in the coming year, and it seems China has arrived early at the starvation party, with the China Banking Regulatory Commission admitting to notable shortages in corn, cotton, sugar, and more. The government is selling stock from its emergency reserves right now but how long can that last?

Food is serious business in China. The average family spends 50% of their income on it, as compared to the United States, where food is approximately 13% of a family’s budget. A recent $0.07 increase in school lunches set off a good old-fashioned riot at one Chinese high school recently. Chairman Mao, it seems the peasants are revolting and you probably should be quaking in your dead-and-gone communist shoes that the last remaining bastion of that wonderful government model known as communism is about to bite the dust. All because of a modest rise in the price of a Chicken McNugget.

All we can say is that a few billion people storming the gates of the castle, well, it’s not going to be a pretty sight. Farewell communism, it’s not been nice knowing you.

The American Monetary Association

American Monetary Association

Flickr / _pdra’s portfolio [busy]

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