5 ms·

inflation?

• lsc 15y ago
  My understanding is that the relative value of different currencies (what we're talking about here) is a different (but somewhat related) thing to inflation within a currency. But yeah, in this case, a stronger yuan would cause prices of Chinese manufactured goods sold in the US to rise. So yeah, that'd contribute to inflation, but my understanding is that significant long-term inflation is... difficult without wage inflation, so it'd probably be more like the commodity inflation we've experienced, where prices went way up then stayed flat or came back down; they didn't keep going up. Of course, /if/ policymakers get their way and more manufacturing jobs are moved back to the US, in the best case that could cause demand for unskilled workers to rise, and maybe we'd see some wage inflation; but that sounds ridiculously over optimistic to me. We have a lot of 'discouraged workers' on the sidelines who will come back if they think they have a chance at a job.
  • tatsuke95 15y ago
    I think you nailed the effect, just have to combine the two: both forms of inflation could occur. First through prices as consumer goods become more expensive, then later through increased wages to compensate as well as capture some of the excess returns capital earns. In the textbook version, we'd end up in the same spot.