Will Real Wage Inflation in China Cause Stealth Wholesale Inflation in the United States?
Many nations have accused the United States of causing inflation throughout the world.
They say that due to our stimulus we put trillions of dollars into the system, and since it all ended up in emerging nations, it hurt their economies, and now they must deal with the inflation.
Since that money hasn't come back to the United States in large amounts, we haven't experienced the inflation caused from our printing of money.
Well, I will leave that for another debate for two reasons; first, because there's a lot more to it than that; and second, because I have some other points to make in this particular article.
There are many reasons for inflation, as well as several types of inflation.
In economic theory wage inflation is one of the biggest challenges and that's happening right now in China.
There was an interesting article in the Wall Street Journal on July 5, 2011 titled "Strong Yuan Throws Curve - Manufacturers Look for Alternatives, Inside and Outside China, as Currency Rises" by Dana Mattioli and Chana Schoenberger.
The article stated; "Over the past 2-years, hourly wage rates in China have increased 50% for many companies.
One sports shoes and apparel company is in crisis mode to find a solution and speeding up plans to manufacture goods in other parts of Asia.
" Now then, because China is the factory floor for so many US based "Fortune 500 Companies" which are building their products in China this will raise the wholesale inflation of everything we buy, as those labor costs increase.
Therefore we will see inflation in the costs of goods that we purchase, as well as the components inside what we make here as well.
But we will not see wage inflation, because the wage inflation is happening on the other side of the planet.
So China is dealing with wage inflation, and we are dealing with wholesale inflation because they make so much of what we buy.
Okay so, I dare to ask the question; "Will Real Wage Inflation in China Cause a Stealth Wholesale Inflation in the United States?" Indeed it will, and we will soon notice this as prices go up on the things that we buy.
Since much of what we buy is imported, then a good chunk of all the products will increase in price.
It will also eat into corporate profits along the way.
You must also realize that with high unemployment people won't be able to pay too much of these higher prices, and the companies must burden some of that increased cost.
This could affect our stock market with lower earnings until the expectations come back in line.
You see, any problem we have here is also a problem in China, and any problem they have there will also affect us here.
The global economy changes the interactions, and we are entering a new age of complexity when it comes to economic theory and study.
Indeed I hope you will please consider all this and think on it.
They say that due to our stimulus we put trillions of dollars into the system, and since it all ended up in emerging nations, it hurt their economies, and now they must deal with the inflation.
Since that money hasn't come back to the United States in large amounts, we haven't experienced the inflation caused from our printing of money.
Well, I will leave that for another debate for two reasons; first, because there's a lot more to it than that; and second, because I have some other points to make in this particular article.
There are many reasons for inflation, as well as several types of inflation.
In economic theory wage inflation is one of the biggest challenges and that's happening right now in China.
There was an interesting article in the Wall Street Journal on July 5, 2011 titled "Strong Yuan Throws Curve - Manufacturers Look for Alternatives, Inside and Outside China, as Currency Rises" by Dana Mattioli and Chana Schoenberger.
The article stated; "Over the past 2-years, hourly wage rates in China have increased 50% for many companies.
One sports shoes and apparel company is in crisis mode to find a solution and speeding up plans to manufacture goods in other parts of Asia.
" Now then, because China is the factory floor for so many US based "Fortune 500 Companies" which are building their products in China this will raise the wholesale inflation of everything we buy, as those labor costs increase.
Therefore we will see inflation in the costs of goods that we purchase, as well as the components inside what we make here as well.
But we will not see wage inflation, because the wage inflation is happening on the other side of the planet.
So China is dealing with wage inflation, and we are dealing with wholesale inflation because they make so much of what we buy.
Okay so, I dare to ask the question; "Will Real Wage Inflation in China Cause a Stealth Wholesale Inflation in the United States?" Indeed it will, and we will soon notice this as prices go up on the things that we buy.
Since much of what we buy is imported, then a good chunk of all the products will increase in price.
It will also eat into corporate profits along the way.
You must also realize that with high unemployment people won't be able to pay too much of these higher prices, and the companies must burden some of that increased cost.
This could affect our stock market with lower earnings until the expectations come back in line.
You see, any problem we have here is also a problem in China, and any problem they have there will also affect us here.
The global economy changes the interactions, and we are entering a new age of complexity when it comes to economic theory and study.
Indeed I hope you will please consider all this and think on it.
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