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Sunday, May 07, 2006


claus vistesen

Very important topic ... especially the way it relates to what you wrote about IMF's global economic outlook recently and the possible correlation between inflation and globalization as a result of lacking spare capacity. What will it mean for the global output gap when China comes storming up the value chain and crucially; will it continue to be positive sum from the Western world's pov?

Arthur Eckart

It's predictable. China is producing similar to the Industrial Revolution of 1871-1914, with the notable differences that there's little invention, and of course, it's an open economy. China is more like Japan in the 1960s, when it created junk and then eventually specialized in a few industries where quality improved. China needs to differenciate to better compete with other Third World competitors rather than continue to sell (or dump) at the lowest prices. However, it seems, China is gradually moving in that direction. A global output gap may be more fleeting than a domestic output gap, because of shifts in the goods market-money market-foreign exchange market through changes in interest rates and currency exchange rates.

Arthur Eckart

The chart in the article shows the U.S. share of world manufacturing output increased over a period when U.S. manufacturing jobs decreased by large numbers and when there were huge annual U.S. trade deficits. So, it seems, both U.S. manufacturing productivity and the value of U.S. manufactured goods increased greatly (see link below). Also, the chart suggests, China is taking market share away from Japan, while China's share of world manufacturing output increased sharply.



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cheap jordans

Wonderful blogs, but about the last two paragraphs (mean I don't really understand. Can you explain it?

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