Friday, 5 February 2010

China 2006 = USA 2010?

Scott Sumner writes:
"I understand that China has begun growing briskly again and that at some point they will need to start appreciating the yuan again to prevent overheating....But it is too soon to tighten now. If China slows, our recovery will also be threatened"
In other words, even though the Chinese economy is growing fast, they aren't suffering inflation because there's plenty of spare capacity in the rest of the world to help keep prices down.

Does that remind you of this article (and ten thousand others) from 2006?
...the increasing integration of national economies contributed heavily to the global decline in inflation. As then-Federal Reserve Chairman Alan Greenspan noted in this May 2004 speech, globalization affords Americans access to goods and services that are produced more cheaply abroad in places where large labor forces work for less money (e.g. China)
Funny how things turn around, eh?

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