The article, "Chinese Prices Surged Again Despite Price Controls" is published in the New York Times on November 14, 2007.
Statement from the article: Consumer prices unexpectedly surged again last month in
American companies buying from
My Point of View: Why is this an economic problem?
Price controls keep the average price of goods and services at a level that is lower-than-optimal (optimal being the intersection of supply and demand). Currency controls keep the value of the Chinese currency lower-than-optimal. Both of these factors, along with the relative prices here in the
For a long time now, politicians, firms, and policy-makers have been accusing the Chinese central bank of setting the $/Yuan too low (the dollar is appreciated), which discourages consumption of domestic goods, and encourages consumption of foreign (Chinese) goods. Well, as I said in an earlier article, it is not the nominal exchange rate, but the real exchange rate that matters. Holding
Inflation and rising prices in