China..reason for inflation in US :)
Looks like the new year has proven to be a nightmare to the rulers of china.
It all began with the severe snow, the worst in half a century which literally brought the whole country to a standstill...More than 3 million passengers were stranded in a railway station...
After the storm settled down, another storm has hit the ruling party....
the storm of inflation...It rose to close to 8.7% the highest in the past 12 years.
All these in the year of the olympics where China wants to showcase its prowess in all aspects.
The country which was defying all the laws with its continued double digit growth rate for more than a decade seems to be faltering on the front of ensuring the survival of many of its citizens who are starving to death due to the roaring prices.
No longer is one country's inflation its own problem. When it comes to the likees of the exports that China does it becomes a global problem, because the chinese products would no longer remain cheap causing the ripples across the globe.
It would be interesting to see how Federal bank of America tackles this situation. It is pumping huge amounts of money into the markets, of the order of $200 billion to ease the liquidity crunch and reducing the inflation rate to boost the consumption. The interest rates in US are already at very low rates and Fed is still reducing them
If at all Fed would have wanted to something not to happen, then it was the increase in prices of Chinese goods, but the nightmare has become reality.
All the factors which should act as stabilizers seem to be adding more chaos to the existing situations.
Last term we studied that it is vey difficult for US to get into recession because every week US monitors close to 25 variables to understand the economic situation and accordingly action plan is framed. But, nowadays nothing seems to work the US way on the economic front.
Interest rate alone is one of the very few factors which the federal banks of any country can control. With the spiralling costs Fed would be tempted to increase the rates but to boost the economy it has to cut the interest rates.
I pity the chairman of FED who is caught in this nightmare. I hope US comes out of this recession so that all the students pursuing managemenet studies are not affected :)
It all began with the severe snow, the worst in half a century which literally brought the whole country to a standstill...More than 3 million passengers were stranded in a railway station...
After the storm settled down, another storm has hit the ruling party....
the storm of inflation...It rose to close to 8.7% the highest in the past 12 years.
All these in the year of the olympics where China wants to showcase its prowess in all aspects.
The country which was defying all the laws with its continued double digit growth rate for more than a decade seems to be faltering on the front of ensuring the survival of many of its citizens who are starving to death due to the roaring prices.
No longer is one country's inflation its own problem. When it comes to the likees of the exports that China does it becomes a global problem, because the chinese products would no longer remain cheap causing the ripples across the globe.
It would be interesting to see how Federal bank of America tackles this situation. It is pumping huge amounts of money into the markets, of the order of $200 billion to ease the liquidity crunch and reducing the inflation rate to boost the consumption. The interest rates in US are already at very low rates and Fed is still reducing them
If at all Fed would have wanted to something not to happen, then it was the increase in prices of Chinese goods, but the nightmare has become reality.
All the factors which should act as stabilizers seem to be adding more chaos to the existing situations.
Last term we studied that it is vey difficult for US to get into recession because every week US monitors close to 25 variables to understand the economic situation and accordingly action plan is framed. But, nowadays nothing seems to work the US way on the economic front.
Interest rate alone is one of the very few factors which the federal banks of any country can control. With the spiralling costs Fed would be tempted to increase the rates but to boost the economy it has to cut the interest rates.
I pity the chairman of FED who is caught in this nightmare. I hope US comes out of this recession so that all the students pursuing managemenet studies are not affected :)
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