econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



What We Read Today 28 December 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

Causes and consequences of China’s contagious case of deflation (George Magnus, Financial Times)  Yes China and deflation.  GEI News has been following this for 2 1/2 years - producer prices have fallen by 10% over the past three years with the annual change negative for 33 consecutive months.  Consumer prices have followed with inflation shrinking to 1.4% annual gain for the CPI (Consumer Price Index) in November 2014.  The deflation is structural, driven by over-capacity in manufacturing and property development, accompanied by one of the world's highest debt to GDP ratios.

The situation fits the pattern that the Great Depression era economist Irving Fisher called debt deflation, the contraction of economic activity resulting from the liquidation of debt and the resulting decline in the money supply (yes Fisher recognized that debt was money).  Presumably monetary policy actions, or increase in fiscal deficits so that government debt replaces some of the liquidated private debt, can mitigate the general decline in prices (and therefore production) as well as falling private wealth - but this remains a matter of debate among economic "philosophers" to this day.  The debate is encouraged by the fact that no "pure" execution of any of the competing "philosophies" has ever been conducted to support or refute any of the theories.

In recent times the debt deflation theory of depressions (or recessions) has been developed further by a few economists, including Richard Koo (who calls the condition "balance sheet recessions") and Steve Keen who preserves the original Fisher designation.

Trading Economics has a graphical summary of the year-over-year deflation in China:

China-ppi-2014-nov

GEI News has had 26 reports on the developing deflation story in China, starting 30 months ago with China: Economic Numbers Weaken, Inflation Slows. Does Deflation Await? (GEI News, 09 June 2012)

In the GEI News series the question was asked if deflation in other parts of the world could be spreading to China.  In the FT article George Magnus argues that the real risk now is that Chinese deflation will spread to the rest of the world.  He writes:

The consequences of China’s deflation problems are ubiquitous and spilling into the rest of the world. Slower economic growth and a steady decline in the economy’s commodity intensity is already affecting commodity producers from Perth to Peru, with negative multiplier effects arising from lower revenues and reduced capital spending by resource companies. Moreover, as Chinese companies cut prices to clear excess supply, global competitive pressures intensify, forcing foreign manufacturers to do so too. 

Articles about events, conflicts and disease around the world
Another special topic today:  Space


Discussion behind the wall today addresses the state of higher education in the U.S. and the needs of the economy for educational system output over the next decade.


Do not miss "Other Economics and Business Items of Note", the final section every day.

Please support all that we do at Global Economic Intersection with a subscription to our premium content "behind the wall".

There are between 75 and 100 articles reviewed most weeks. That is in addition to the 140-160 articles of free content we provide.

You get a full year for only $25.




The rest of the post is for our premium content subscribers - Click here to continue reading. If you have forgotten your login or password - send an email to info at econintersect.com.










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.




Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.






Econintersect Behind the Wall



search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Men Without Work
Slow Economic Growth Will Be Around For A Long Time
News Blog
The Best Hilarious Prank Ideas For April Fools' Day
February 2017 Pending Home Sales Index Improves?
The Need For Very Low Interest Rates In An Era Of Subdued Investment Spending
America's Missing Workers Are Primarily Middle Educated
The Share Of American Women In The Labor Force Is Slipping Even As It Rises In The Rest Of The Developed World
Infographic Of The Day: Which Countries Are Going In The Right Direction
Early Headlines: Asia Stocks Mixed, Dollar, Oil Up, Gold Down, Article 50 Day, Westinghouse Files Ch. 11, Trump Wants $1B To Start Wall, Russian Protests, China's $8T Shaky Debt, And More
Thirty Plus Terror Suspects And Convicts Not A Rare Occurrence In UK
The Winners And Losers In Trump's Proposed Budget
God and America (Version 3)
Corning's Glass Brimming With Taxpayer Subsidies
Who Americans Consider Their Greatest Enemies
Has The IPad Become A Sideshow Act?
Investing Blog
Investing.com Technical Summary 28 March 2017
The Dollar's Coming Impact On Markets
Opinion Blog
Free Immigration Is The Moderate, Common-Sense Position
Macron May Lead But Le Pen Remains The Big Story
Precious Metals Blog
These Gold Stocks Will Produce Much Bigger Gains Than Gold Itself
Live Markets
29Mar2017 Market Update: Wall Street Trades Mostly Sideways, $DJI Down, SP 500 Flat, Crude Prices Higher, But Quiet, Earlier Prospects Of A Red Session Haven't Materialized In Early Afternoon Trading
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government































 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved