http://blogs.reuters.com/great-debate/2009/11/05/look-out-for-emerging-markets-inflation/ Fri, 24 May 2013 00:28:13 +0000 hourly 1 http://wordpress.org/?v=3.4.2 http://blogs.reuters.com/great-debate/2009/11/05/look-out-for-emerging-markets-inflation/comment-page-1/#comment-27096 scheng1 Tue, 17 Nov 2009 14:20:18 +0000 http://blogs.reuters.com/great-debate/?p=5668#comment-27096 The problem is that China is too big. Inflation in the cities will have a ripple effect on the rural areas. When the cost of real estate escalates in cities, the manufacturing cost increases, the farmers will have to pay more for products and services originate in cities. This will cause the rich-poor gap to widen between city-folks, and rural folks. The problem is that China is too big. Inflation in the cities will have a ripple effect on the rural areas. When the cost of real estate escalates in cities, the manufacturing cost increases, the farmers will have to pay more for products and services originate in cities.
This will cause the rich-poor gap to widen between city-folks, and rural folks.

]]> http://blogs.reuters.com/great-debate/2009/11/05/look-out-for-emerging-markets-inflation/comment-page-1/#comment-26787 M Fri, 06 Nov 2009 20:53:39 +0000 http://blogs.reuters.com/great-debate/?p=5668#comment-26787 James, why can’t you propose a topic about how blue the sky is? Inflationary induced mechanisms through exchange rates are still debated after years of theoretical and empirical research – see Lucas, Krugman, Wallace and so many other distinguished economists. A common denominator on the subject is that if a global entity, say IMF, would be chosen to roll its own presses for the world, and through political coordination, the seigniorage would be distributed evenly across members, than an optimal level of monetary system could be achieved (i.e. minimal cost for international transactions). However, the reliance on seigniorage and other aspects of monetary policies vary greatly among economies, thus monetary unions are most likely to incorporate countries with similar economies. Although the EU adopted such a policy, the level of reliance on seigniorage among member states differs significantly – see Champ and Freeman. In the absence of such degree of integration, it is argued, several currencies traded at FIXED exchange rates with no currency control and freely traded anywhere would beneficially serve the same objective, although it is not clear how a country can be prevented to tax the entire world through inflation, not to mention the speculative attacks. In any way, the inflation can be prevented if countries agree to limit individually the expansion of fiat money. If not, any country can still defend against inflation by imposing its own currency control, subsequently imposing a tax on any local trader. James, why can’t you propose a topic about how blue the sky is? Inflationary induced mechanisms through exchange rates are still debated after years of theoretical and empirical research – see Lucas, Krugman, Wallace and so many other distinguished economists.
A common denominator on the subject is that if a global entity, say IMF, would be chosen to roll its own presses for the world, and through political coordination, the seigniorage would be distributed evenly across members, than an optimal level of monetary system could be achieved (i.e. minimal cost for international transactions). However, the reliance on seigniorage and other aspects of monetary policies vary greatly among economies, thus monetary unions are most likely to incorporate countries with similar economies. Although the EU adopted such a policy, the level of reliance on seigniorage among member states differs significantly – see Champ and Freeman. In the absence of such degree of integration, it is argued, several currencies traded at FIXED exchange rates with no currency control and freely traded anywhere would beneficially serve the same objective, although it is not clear how a country can be prevented to tax the entire world through inflation, not to mention the speculative attacks.
In any way, the inflation can be prevented if countries agree to limit individually the expansion of fiat money. If not, any country can still defend against inflation by imposing its own currency control, subsequently imposing a tax on any local trader.

]]> http://blogs.reuters.com/great-debate/2009/11/05/look-out-for-emerging-markets-inflation/comment-page-1/#comment-26709 Sammy Thu, 05 Nov 2009 15:06:24 +0000 http://blogs.reuters.com/great-debate/?p=5668#comment-26709 I sincerely hope that the dollar carry trade becomes so big (in tens of trillions of dollars) that when the inevitable snap back happens all the speculators and the central banks that support them will be wiped out clean for a long time. Bring on the deflationary collapse. I sincerely hope that the dollar carry trade becomes so big (in tens of trillions of dollars) that when the inevitable snap back happens all the speculators and the central banks that support them will be wiped out clean for a long time. Bring on the deflationary collapse.

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