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China's Exported Inflation May Signal Interest-rate Pressures

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The rising cost of goods the U.S. imports from China may be an early warning signal that central bankers from the U.K. to India are about to pay a price for a cause they've championed: globalization
Prices of U.S. imports from China increased 0.3 percent in May from the previous month -- ``the first sign I've seen that this disinflationary pressure'' from China's cheap goods may be fading, former Federal Reserve Chairman Alan Greenspan said last month. Prices rose 0.3 percent again in June, the biggest back- to-back increase since record-keeping began in December 2003.

With monetary policy makers struggling to contain pressures from other forces beyond their control -- increased trade, faster capital flows and record commodity prices --officials including Bank of England Governor Mervyn King and New Zealand's central bank Governor Alan Bollard may have to raise interest rates or maintain them at higher levels for longer than they might prefer.

dont need to say anything :rolleyes:

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dont need to say anything :rolleyes:

If I were going to add anything to this I'd say that they have it the wrong way round (as usual). What they should have said was not that China is exporting inflation - this is garbage, China exports massive quantities of consumer goods - but that China is simply not monetising as much of our trade deficit (our inflation) as they were doing. If this trend continues then the conclusion of the article may hold. Although it is not the central banks job to control how fast prices go up or even to control inflation (that's merely a feint). The central banks job is to monetise the governments deficits* and try to pretend that it has no effect on the economy or price levels, and that the cause of the financial dislocations are the part of businesses raising prices or of wage rises. Part of that attempt may be to lift short term rates to prop up demand for money (raise its price) thus lowering prices - or lessening the extent of rising prices.

What I think is more likely is they'll simply blame China for the rising prices and not allow 'policy' to be 'undermined'. Hell, with this new mortgage measure in the CPI. it'll become 'inflationary' to raise interest rates.

*The public finances deteriorated in May I understand. The governments prefered measure (holy cow, so even the bogeyed version is bad!) ran at £7.5bn just for the month!

Let me get one thing straight. The government does not BORROW this money. The government PRINTS the money - 'backed' by bonds (created out of thin air) to be financed simply by further so called 'borrowing' as required. The whole thing is a great deception. Government don't borrow, the tax and inflate. That is all.

We are not in the midst of a credit expansion proper, but an inflationary episode of mega proportions.

Edited by Far Out Bear

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You want to see inflation? Wait until more Chinese sterling reserves get diverted into buying up UK assets instead of sitting on Chinese soil.

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A friend of mine who imports toys from China was complaining that prices are rising because the Chinese government has cut the subsidies that it used to offer.

I also suspect that China's broad money supply may now have gone into positive territory compared to growth. If you can find the graph that has been posted here before comparing money supply and growth, growth was higher from about 2001/2002, which would help to explain the falling prices that we have seen.

http://english.cri.cn/3130/2007/07/08/262@247119.htm

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