Yesterday, I posted a blog entry detailing how Stephen Roach sees inflation as a concern, not because of food and oil, but because of Asian manufacturers. I find his argument compelling. Don’t get me wrong, I think deflation is the longer-term worry. But, right now an inflationary spiral is of greater concern. Jim Jubak has jumped on this bandwagon as well.
In a missive, entitled “Inflation from Asia: The next crisis,” Jubak details how inflation in countries like Vietnam and Malaysia is spiraling out of control. This, combined with negative real interest rates promotes debt spending and debt accumulation at the expense of savings, putting these countries on a collision course with an economic crash.
Jubak writes:
As bad as these numbers [in the chart below] appear, they’re actually worse than they look. Many, even the low readings from Malaysia and Taiwan, represent longtime highs that are accelerating rapidly.
| Country | Annual inflation |
|---|---|
|
China |
7.7% |
|
India |
8.2% |
|
Indonesia |
10.4% |
|
Malaysia |
3.0% |
|
Philippines |
9.6% |
|
Singapore |
7.5% |
|
South Korea |
4.9% |
|
Taiwan |
4.1% |
|
Thailand |
7.6% |
|
Vietnam |
25.0% |
The issue for those of us outside of Asia is clearly the ability and need for Asian producers to pass on their higher costs to us in the form of higher prices. It seems quite evident that the bonus of importing disinflation from Asia is at an end and a new era of importing inflation from that region can only add to our economic worries.