Monday, January 28, 2008

Inflation, Where?

"Central bankers pondering what to do in the event of a U.S. recession are finding that inflation just isn't what it used to be. ... But several factors, including the surge in demand from emerging-market heavyweights like China, are set to keep commodity prices high during this downturn. ... For sure, the inflation spikes of the 1970s aren't likely to stage a global comeback. ... But after years of persistently low inflation, prices are rising at a faster clip in the developed world--and some of the jumps in food and energy are spilling over into other areas. ... Many economists ... argue that the entry of millions of Chinese, Indian and other former communist-country workers into the world economy was a one-time disinflationary force that has lost it oomph. ... But some economists say ... that emerging markets will continue to surge even as U.S. growth slows. Not everyone buys that", Joellen Perry and Justin Lahart at the WSJ, 25 January 2008.

I am in partial agreement. I agree the entry of China, India and Eastern Europe into the world's economy was an "exogenous shock" which reduced measured inflation. I disagree that "the inflation spikes of the 1970s aren't likely to stage a comeback".


Tom Stone said...

Is it time for Breatharianism to become mainstream?

Independent Accountant said...

Maybe. Or else we'll all eat "Rainbow Stew", see my 28 October 2007 post.