Will Chinese Inflation Hit Us Soon?
Walmart, JC Penny and other big retailers may be spending as much as 30% more for the stuff they get from China. Will we see higher prices here in the U.S. soon?
The fact is, China's got price inflation now. For one thing, they're paying more for the natural resources they need, like oil and natural gas and coal, etc. Now that they're become a manufacturing giant, they no longer produce enough of this stuff in China to keep up with the increased demand for energy that all those manufacturing plants require.
Then there are all those Chinese workers who've decided that they want a bigger cut of the action. They've been working for what we in the U.S. would consider slave wages for years. Now they're demanding - and getting - more.
And I'm not telling you anything you don't already know by reminding you that most of the stuff we buy these days comes from overseas - especially China. In fact, Walmart gets the majority of their stuff from China. And Walmart is the #1 retailer in the U.S.
So exactly how long will it be before we start seeing prices go up in Walmart, JC Penny, and all the other big retailers? We can't be sure, but unless there's a reversal of price inflation in China, we're probably looking at sometime in 2011.
That assumes, or course, that the world continues to recover from the recession. If recovery continues - no matter how weak it is - it means there will be increased demands for stuff by consumers. And as long as demand holds up, with prices for raw materials and labor going up too, prices of the finished goods - the stuff us consumer buy - will go up.
Of course, there's always the happy thought that maybe we consumers won't buy so much when we see prices go up. After all, are you really in great need of more stuff? Really?
I was just talking to one of my kids about some things they were looking to buy for themselves. Now they weren't asking me for money or anything. They were going to spend their own money. But I just felt that it was one of those "teaching moments."
So I launched into this little lecture about how we've all got so much and how you should ask yourself if you really need this stuff you're going to buy. After all, you worked for the money. Is it really worth what you're going to pay (it was clothes) considering you can't even fit the clothes you have now into your closet?
Of course, they nodded and went ahead with buying the item. I figure (hope?) the message might sink it at some point.
So how about you? You're not going to keep buying all that stuff if prices go up, are you?
What? Oh, I see. That's why you're buying all that stuff now. You figure you might as well get it now before the prices go up.
But wait. I thought that when people start buying up things in anticipation of higher prices to come, that was a sign that we've got inflation. Can't be, though. The government says inflation's low. After all, the Feds printing up all that money for quantitative easing because they're worried that we've got deflation.
Aw, c'mon, which is it? Inflation or deflation? Maybe deflation here, inflation in China? But if there's inflation in China, then we should have price inflation here at some point. Could it be that China's gotten so important now - at least in the economy - that they're inflation becomes our inflation?
Well, it goes to show how tied together the world's economy really is. And I think it may eventually show that what happens in China is now more influential than what happens here in the U.S. And that would be a pretty big change from the way things have been since World War II. Time will tell.
The fact is, China's got price inflation now. For one thing, they're paying more for the natural resources they need, like oil and natural gas and coal, etc. Now that they're become a manufacturing giant, they no longer produce enough of this stuff in China to keep up with the increased demand for energy that all those manufacturing plants require.
Then there are all those Chinese workers who've decided that they want a bigger cut of the action. They've been working for what we in the U.S. would consider slave wages for years. Now they're demanding - and getting - more.
And I'm not telling you anything you don't already know by reminding you that most of the stuff we buy these days comes from overseas - especially China. In fact, Walmart gets the majority of their stuff from China. And Walmart is the #1 retailer in the U.S.
So exactly how long will it be before we start seeing prices go up in Walmart, JC Penny, and all the other big retailers? We can't be sure, but unless there's a reversal of price inflation in China, we're probably looking at sometime in 2011.
That assumes, or course, that the world continues to recover from the recession. If recovery continues - no matter how weak it is - it means there will be increased demands for stuff by consumers. And as long as demand holds up, with prices for raw materials and labor going up too, prices of the finished goods - the stuff us consumer buy - will go up.
Of course, there's always the happy thought that maybe we consumers won't buy so much when we see prices go up. After all, are you really in great need of more stuff? Really?
I was just talking to one of my kids about some things they were looking to buy for themselves. Now they weren't asking me for money or anything. They were going to spend their own money. But I just felt that it was one of those "teaching moments."
So I launched into this little lecture about how we've all got so much and how you should ask yourself if you really need this stuff you're going to buy. After all, you worked for the money. Is it really worth what you're going to pay (it was clothes) considering you can't even fit the clothes you have now into your closet?
Of course, they nodded and went ahead with buying the item. I figure (hope?) the message might sink it at some point.
So how about you? You're not going to keep buying all that stuff if prices go up, are you?
What? Oh, I see. That's why you're buying all that stuff now. You figure you might as well get it now before the prices go up.
But wait. I thought that when people start buying up things in anticipation of higher prices to come, that was a sign that we've got inflation. Can't be, though. The government says inflation's low. After all, the Feds printing up all that money for quantitative easing because they're worried that we've got deflation.
Aw, c'mon, which is it? Inflation or deflation? Maybe deflation here, inflation in China? But if there's inflation in China, then we should have price inflation here at some point. Could it be that China's gotten so important now - at least in the economy - that they're inflation becomes our inflation?
Well, it goes to show how tied together the world's economy really is. And I think it may eventually show that what happens in China is now more influential than what happens here in the U.S. And that would be a pretty big change from the way things have been since World War II. Time will tell.
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