NYT: Global Trends May Hinder Effort to Curb U.S. Inflation

[DeepModem Mom]

Global Trends May Hinder Effort to Curb U.S. Inflation
By EDMUND L. ANDREWS
Published: August 28, 2006

JACKSON HOLE, Wyo., Aug. 27 — As the Federal Reserve fiercely debates how to reduce inflation within the United States, economists are warning that trends outside the country may soon make the Fed’s job much harder.

In recent years, global integration has made things easier for the Fed in two ways. An explosion in low-cost exports from China and other countries helped keep prices of many products low even as Americans spent heavily and loaded up on debt.

At the same time, China and other relatively poor nations reversed the normal patterns of global investment by becoming net lenders to the United States and Europe. Analysts estimate that this “uphill’’ flow of money from poor nations to rich ones may have reduced long-term interest rates in the United States by 1.5 percentage points in recent years — a big difference when home mortgage rates are about 6 percent.

But as Fed officials held their annual retreat this weekend here in the Grand Tetons, a growing number of economists warned that those benign international trends could abate or even reverse....China’s explosive rise as a low-cost manufacturer does not mean that prices will fall year after year. Indeed, China’s voracious appetite for oil and raw materials has aggravated inflation by driving up global prices for oil and many commodities.

Beyond that, new research presented this weekend suggested that the United States could not count on a continuation of cheap money from poor countries. Those flows could stop as soon as countries find ways to spend their excess savings at home....

http://www.nytimes.com/2006/08/28/business/worldbusiness/28fed.html?adxnnl=1&adxnnlx=1156739701-oBCrS7BdYDyQNYxYLKhzOw

[skids]

1. Or in other words:

Put your wallet between your butt cheeks and kiss it goodbye.

[SpiralHawk]

2. Other words: Bush republicons have run America's economy into the crapper

while lining their own pockets with massive oil and munitions profits paid for by America's working stiffs.

Thanks a pantload, you corrupt republicon cronies.

[robbibaba]

3. To be fair...

It wasn't just the Rethugs. Didn't our man Clinton sign all of those nifty trade agreements?