Gloom, boom and doom….and inflation

I see from comments that some of our readers are skeptical about the threat of inflation and point out that other countries run at 6.5 per cent quite happily. That’s true but first of all, other countries aren’t in China’s unique, indeed, never-before-seen-in-the-history-of-the-planet–stage of economic development. The strains and stresses that a developed economy can bear are very different from those that China can, which in fact are pretty well unknown. Secondly, it is the threat of much higher inflation that these figures portend that is really worrying. As economist Albert Keidel of the Washington DC Carnegie Endowment writes, the Chinese government must act immediately to “to avoid the danger of harsh corrective steps which in the past caused severe declines in GDP growth, fueled deadly urban civil unrest throughout the country, and brought long-lasting damage to China’s international reputation.” For his just published paper, which is a good representative of the pessimistic view I referred to in my last post, see here.