Posted on 10/02/2007 3:01:32 PM PDT by Tolerance Sucks Rocks
Former Federal Reserve Chairman Alan Greenspan is warning of a sea change coming to the global economy. Greenspan says the glory days of low-cost imports from China are coming to an end, sending a wave of inflation to the U.S., reports Bloomberg.
After a speech in London yesterday, Greenspan answered an audience member's question about whether China's rapid economic growth will translate into rising prices. Greenspan cited an index of import prices from China to the U.S. that revealed prices are already beginning to trend higher (see chart).
The index "finally turned higher in the spring," said Greenspan. "It's saying that we're getting there."
Prices of imports from China to the U.S. have been steadily increasing for the past four months, rising 1.1 percent in August, according to the U.S. Bureau of Labor Statistics.
Greenspan pointed to rising wages for skilled and semi-skilled workers in China.
"[The] ability of China to continuously suppress the world general price level is beginning to run into trouble, in part because Chinese wages are going up," he said.
"It was truly a golden age and it is in the process of being over," Greenspan said. "Inflationary pressures are beginning to mount."
Until now, China has been a force for disinflation in the global economy and in the U.S. in particular. In other words, its low-cost goods have kept a lid on inflation in the U.S. and allowed Americans to maintain their standard of living in the face of rising oil prices and a collapsing housing market. But it is clear that those good times are abruptly coming to an end.
My respect for Greenspan has plummeted since he went from managing the fed to hawking his book.
Will this guy ever shut up... between him and algore and the impeached ex president cliton..it’s the pits
There are other low cost areas that can take over. Greenspan is almost always wrong.
I wonder how much of this so-called "inflation" is really just the result of higher costs associated with more stringent quality control measures in the aftermath of all these product recall stories.
No one is more responsible for any inflation surfacing in our country than Greenspan himself, who sold out to Bill Clinton and began flooding the marketplace with printing press dollars back in the mid-90’s. The trend continues to this day because it’s almost impossible to stop it without an instant, significant hit to the U.S. economy. But whether it’s now, or delayed, the fiddler will be paid, and it won’t be China’s fault when it happens.
“My respect for Greenspan has plummeted since he went from managing the fed to hawking his book”
Greenspan and his wife are wealthy, so it must be the bestseller list ego thing.
This is easy..........stop buying anything made in China. I stopped a long time ago. I pay about $20 per tire more for my vehicles but they are made in the US. I don’t care if it costs me a little more. I’d rather do that than support a communist regime.
Low prices doesn’t mean low inflation. Henry Ford’s introduction of the assembly line, which reduced the price of cars, was NOT a deflationary act, nor was Apple’s price cut on their iphone.
Rising Chinese wages will also make their goods more expensive. As their goods because more expensive, other countries goods, including Americans, will become more competitive. As demand for Chinese goods tapers, so will their increases in wages.
Inflation is only a result of excess money. It is often reflected in prices, but changes in prices due to changes in supply & demand do not effect inflation.
Greenspan is a lot like Clinton. . . you just wish they would go awy and STFU!
Way to go, US "captains of industry".
Ego and social tickling. He wants to be a hero at all the leftist billionaire parties in NY and DC.
Not so sure I buy this. The supply curve does reflect input costs. For China, recent product recalls (mainly toys) suggest they are going to have to increase quality control elements of production plus use more expensive inputs (e.g., non-lead based paints). This will shift the supply curve up, which (ceteris paribus) means that prices will rise. To the extent that rising input prices raise output prices, supply can cause inflationary pressures in the market. Look what ethanol production has done to milk prices and what increased demand for oil in China has done to world oil prices, and the trickle effect of those price increases.
More Pimpco BS.
Other countries are quite happy to take formerly Chinese contracts at a lower cost. The Chinese are going to be yelling about it too as it happens. Lotsa threats.
He is pretty old, he should die soon.
Which tire brands are US made?
There will always be another “Slave State” to turn to.
Low cost imports from china?
How about good quality not hazardous imports from china instead of the crap the little commies send us now.
LMAO!
Hah, hah, hah...
This happened to countries like Korea and Taiwan and to cities like Hong Kong and Singapore. Labor intensive industries moved in, and later moved out. Now those countries/cities are into high tech or services. This is nothing new. The only thing that is new is the scale that is China.
The test will be whether China can stay competitive as their wages rise. That is, will they be able to replace some of those lost industries (like textiles) with those that pay higher wages like autos. I'm confident they will and will continue to be a major exporter.
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