Is the US Importing Inflation?
8th April 2008
Chinese inflation might be causing bigger problems than costing you more to eat huiguo rou and beer at dinner time in Beijing. Economists are starting to re-evaluate whether America’s historic streak of low inflation is rooted as much in the low cost of imports as the “genius of Greenspan.” The NY Times has a front page article on the issue today:
“Inflation is the major threat to Asian countries,” said Jong-Wha Lee, the head of the Asian Development Bank’s office of regional economic integration.
It is also a threat to Western consumers because Asian exporters, even in very poor countries, are passing their rising costs on to customers.
Developing countries have had bouts of inflation before. Indeed, some are famous for them, like Brazil, which experienced triple-digit inflation in the late 1980s and early 1990s. But two things make this time different, and together promise to send prices higher at Wal-Mart and supermarkets alike in the United States, just as the possibility of recession looms.
If China begins (continues?) exporting inflation to the US, it’s just possible that politicians in America might begin longing for the days of “currency manipulation.”