Sunday, January 30, 2011

Inflation in China reduces our trade deficit with them and brings jobs back to the US, right? I REALLY hope not!!

The other day in class I referred to Inflation as a thief in the night that takes money out of your pocket.  Not literally, but it does reduce the purchasing power of the money you possess, so you are in some measure being robbed.  It not only robs individuals, but whole countries. You might be surprised by which country, in my opinion, will be hurt the MOST by inflation in China---The US!

This article in the NYTIMES: Inflation in China May Curb U.S. Trade Deficit suggests that inflation in China will help reduce our trade deficit with them and that this might be a good thing. Yes, with higher prices for Chinese goods we will buy less (the Law of Demand) from them.

I. am. waiting. for. the. good. news...

This means the "stuff" we do buy from them, and will continue to buy from them, will be more expensive.

Inflation in China does not benefit us. It makes us pay more for staple items that meet our "needs" and we have less to buy things we "want". How is that a good thing?

Many of the consumer goods mentioned in the article produced in China are goods that are low tech in nature and have reached a routine manufacturing stage where it does not take a lot of skill or resources to produce them. THOSE JOBS ARE GONE FROM THE US AND WILL NOT COME BACK.  No amount of hand-wringing and politicking will change that.  Nor should we covet them.  Rather, we must invest in and prepare for the jobs of the future, not invest current resouces in trying to recover the jobs of the past.  I don't teach so you can re-gress. I teach so you can pro-gress.
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