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Old 16th April 2007, 12:32 PM
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Re: April 16 (Bloomberg): What Grows $1 Million a Minute?

Yes, one or two Western economist have begun to realise that it is just possible that they have not even began to understand what is going on here.

The basic problem is that they think that models of controlling inflation with money supply in Europe and the States are directly transferable to China. In short they are not. The potential labour pool is so massive that in the short-term no amount of inward investment is going to prove significantly inflationary in the short-term.

Even the amount of money in system is not going to make much difference. If all the peasants that are supposed to be on $100 a year are suddenly on $1000 a year the only thing that needs to happen to ensure that prices do not rocket is to ensure that adequate goods in circulation to spend that money on. There is easily adequate potential to absorb the greater supply of money by simply speading it wider rather than deeper. The greatest inflationary pressure in the short-term would arrive from an inadequate supply of consumable such as cars and washing machines to spend the money on. Somehow, I don't think that is going to prove an insurmountable problem. What caused hyper inflation in Russia? It wasn't so much too much money, as nothing to buy!

The main problem that our economist are having, is that most of their conventional measures are still telling them that compared with the US, the Chinese and Indian economies are still tiny. The problem is they are not, but discrepancies in the way things are measured, even on a PPP basis, is huge.

Much of the US economy is accounted for in terms of people preparing food for one another, and people being paid to argue with one another. Frankly, the value of this in China and India is four time larger because they are dealing with four times as many people. The general standard of nutrition in these countries is actually in many ways better than the US because the people are generally healthier as a consequence. So what is actually often termed as a main service industry in the US is not only much bigger in China and India, but by any reasonable measure is much better. Do the Chinese and Indians argue or dispute less than Americans? Does the fact that American lawyers charge such massive fees make any of those argument more valid?
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Last edited by Rubber Duck; 16th April 2007 at 01:46 PM..
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