China is now increasingly exporting inflation.
http://articles.moneycentral.msn.com/Investing/JubaksJournal/ChinasNewestExportInflation.aspxThe gradual integration of China into the global economy gave us those good times. And now it looks like the Chinese economy is going to take them away.
For better than 10 years, the U.S. enjoyed the gift of low inflation. From 1993 through 2004, inflation averaged 2.5% a year. That was significantly below the long-term U.S. trend of 3.0% from 1926 through 2008. And it was a welcome relief after the above-trend inflation of 4.8% from 1980 through 1992.
Because of low inflation, U.S. interest rates gradually fell during those 10-plus years. Interest on a 30-year mortgage dropped from 8.14% in 1993 to just 5.81% in 2004. Businesses and consumers borrowed that cheap money, with the former spending it on new plants and equipment and the latter on new cars and second homes.
Economic growth during those years, discounting the gains from inflation (what's called "real" growth) averaged 3.19% a year, even counting the slump in growth after the 2000 stock market plunge. That was a huge half a percentage point higher than 1980-92's average real growth of 2.69%.
