On this first point he is correct IMO. As to the second point: "wow, look at that, explosive 'growth' and no inflation!", I think he is out to lunch. I would liken this to a man who has a gun with 5 empty chambers and one with a bullet. After pulling the trigger five times while pointing at his own head he concludes, "wow, I guess this is a pretty safe thing to do afterall", and pulls the trigger once more.
On the first point I am more or less inclined to agree with you but would change it perhaps to something like
"Globalization has not only opened up previously closed models but has also changed the speed at which economic advantages can be exploited"
I am wondering if speed is the real change.
After all the US took the manufacturing baton from the UK who took it from Spain perhaps? We traded with UK and Europe and the Mideast for a long time so in a sense we have always been global. What has happened is the speed at which any small advantage can be taken advantage of. The number of players participating is larger as well.
Is that really a "new model" or an incredibly souped up version of the last one thanks in part to the internet and other things?
One can order shoes today from China or tomorrow from Malaysia at the click of a mouse. The affect of this is of course deflationary (in the absence of Tariffs) as it provides an easy way to get the most goods easily from the cheapest supplier.
As for "price inflation", it is indeed higher than Roach says but nowhere near as high as what I think you think, of cousre the latter is not possible to know since you will not state your basket of goods or services or state whether or not equities are included or in fact state anything at all about it other than something to the affect of "it is high".
Now if we define inflation my way, yes inflation went thru the roof in the 1990's by my measurements, and went largely unnoticed because of falling oil prices, rising productivity, outsourcing, global wage arbitrage, etc. Instead, inflation manifested itself in rising equity prices, and now home prices (in an echo bubble).
Mish |
