Global Inflation 'Disaster' Coming, Economist Andy Xie Warns

International Business Times

The Federal Reserve didn't see the U.S. subprime-mortgage crisis coming. The European Central Bank was clueless about the euro zone's debt crisis before it hit.

There is little reason, then, to believe these regulators will see the coming global "inflation disaster," independent economist Andy Xie warns in a recent commentary.

And it is from his commentary I cite below.

Slow Cooking Inflation

Inflation remains on the rise despite a weak global economy.

Fed minutes show that its governors didn’t have a clue about the coming catastrophe in 2008. Similarly, ECB experts didn’t anticipate the sovereign debt crisis. There is no reason to believe that they will see the inflation disaster ahead, especially as the same people are still running the major central banks around the world.

The global economy faces legacy problems (e.g. debt and deficit), secular problems (e.g. aging), and structural problems (e.g. rapid redistribution of production capacity and changing relative prices). Monetary policy can help to stabilize the situation but not revive growth. Central bankers are trying to do the impossible and, inevitably, create monetary excess. This mistake is the reason for the inflation crisis to come.

When monetary policy tries to stimulate the rest of the economy to offset the reallocated activities, globalization diverts its impact through global sourcing to meet the demand. Pushing-on-a-string is the norm, not an exception, for monetary policy in today’s world. When central bankers push harder on the string to achieve policy target, it leads to disasters like bubbles and inflation.

Central bankers were superheroes in the 1990s. They seemed to have a Midas touch in smoothing business cycles. Their sterling record of yesterday is questionable. The Midas touch turns out to have been bubble-making. It seems that they haven’t learned this lesson and insist on being superheroes again. I believe that they are leading the global economy to another disaster.

The economist sees the inadequacy of current institutions to deal with the global economic problems and outlines his views on the only effective measure - a global institution with an effective global coordination mandate to deal with global economic crises:

No economy is bigger than global trade in today’s world. This has fundamentally weakened the effectiveness of economic policy by any one country. Global coordination is critical to reviving the global economy.

The global economic institutions are the WTO, IMF and the World Bank. The WTO deals with trade disputes, the IMF handles balance of payment crises and the World Bank focuses on poverty alleviation in emerging economies. None is equipped to cope with today’s global crisis.

The eurozone debt crisis has exposed the ineffectiveness of the IMF. Globalization has effectively turned many developed economies into developing ones. The IMF couldn’t handle their sizes. It would be a stretch for the IMF to broaden its mandate to deal with global structural issues. Europe’s control over the IMF prevents other countries from embracing it to handle global issues.

Globalization has happened so fast that no sovereign country can deal with its consequences alone. Most experts think that the eurozone crisis shows that one currency needs one government.The challenge is even bigger than that. Currency flexibility is a limited tool. Emerging economies that have half of their economy tradable can’t freely rely on currency flexibility. The whole global economy behaves somewhat like a one-currency economy.

A new institution that both developed and emerging economies can trust should be created. One possibility is to institutionalize the G20. As these economies are two-thirds of the global economy, their coordination could be effective.

Without effective global coordination, the world is in for volatile and difficult years ahead.

What says ATS on the threat of inflation?

I'm not sure myself. If the inflation in emerging economies comes back to the shores of developed countries, then yeah it will be a disaster with high unemployment levels and slowing and contracting economies. Could be a trigger for other major problems beyond upward inflationary pressures.

Apparently Andy Xie called all four financial crises including the Japanese asset bubble of the 1980s, the 1997 Asian financial crisis, the deflation of the dot-com bubble and the U.S. subprime mortgage crisis. According to Wikipedia, the economist published a blog entitled ‘Apocalypse Soon’ heralding the unraveling of the US financial system some one month prior to the collapse of Lehman Brothers in September 2008. Xie has been an economist previously with the IMF and Morgan Stanley.

the dollar is worthless... cash is worthless...

some 80% American adults are still working for their $5-$100/hr saving up.... nothing basically

the other 20% and growing are living off public handouts, will probably never work again

truly the end of the road for everyone except the greedy filthy rich 1% to 10% that knew enough to hoard everything they need in this lifetime - not just $

The Federal Reserve didn't see the U.S. subprime-mortgage crisis coming. The European Central Bank was clueless about the euro zone's debt crisis before it hit.

I have an issue with this as I believe they knew exactly what they were doing. These men don't get to the positions they are in by being clueless. Their motives can be left for another debateAs far as the inflation issue goes. It's going to continue to be a prevalent issue as technology continues to cut into the jobs sector. In essence everything is costing more with less and less jobs. There going to be a breaking point in the future if this fundamental issue is not addressed. I know it's a simplistic point of view, but I find simple common sense to be the best approach when dealing with the monetary and economic systems. It's easy to get caught up in complicated technical problems and then miss the simple fundamental problems.

reply to post by surrealist

16 trillion dollars in an environment of near 0 inflation like we've had due to near outright depression has been disastrous. The thought of that same compounding 16 trillion dollars in debt with a quickly rising set of global interest rates is so catastrophic, I can't help but laugh.

It's just one of those laugh or cry situations because the light at the end of the tunnel is the freight train of paper money it'll take to go to the grocery store if Hyper-inflation kicks in where it probably ought to be in terms of currency printing and flooding the market with it.

I'll save my tears for the human tragedy's in the world around us..there is no shortage and it's building. The math on this one though....Well, it's been a black and white kinda thing. To be sure.

too much money= inflation.....
Hyper much money- hyperinflation....

reply to post by surrealist


I was watching a programme the other night that was touching on this. The programme was actually about China and it's current and future economy but the episode the other night was focusing on inflation and job growth - both being huge fears for the future. For the example, the Chinese estimate (very conservatively) that by 2050 they will have an extra 250 million pensioners to support and that the make up of the workforce will be coming to more closely resemble that of Europe or America (around half the populations of non working ages). In China, this will be around a third but up from around 11%. In essence, this means they need to create an extra 15 million jobs year on year just to stay the same - they need to create more for growth. The conclusions were basically that empirical expansion (commercial rather than military) was the only solution.

All in all, it wasn't painting a particularly rosy picture of the future.

Hahaha clueless, what a joke. How can you be clueless when you engineered the problem in the first place.

Look at it this way, they know they have been committing massive fraud for decades. And they got away with it because it was hidden from public scrutiny. Now we know they have committed this act of financial terrorism thier only option is to go to jail or male thier fraud legal.

The inly eay they can make what they have done legal is to give themselves immunity from prosecution. And the only way they can do that is to commit a financial takeover of democracy.

And this is what we are seeing, when are people ever going to admit this fact?

Originally posted by stirling
too much money= inflation.....
Hyper much money- hyperinflation....

The thing is they haven't only created new money. They have also created an equal amount of debt which has interest attached. The reality is that issuing debt based money actually shrinks wealth. Inflation will stay low until the fed's raise rates, increasing the cost of business for everyone, and viola we will have inflation again.

If supply and demand actually set prices, everything we buy would be lower in price than a few years ago. Thus it is pretty obvious that supply and demand don't set prices and that our whole economic model is structured around falsehoods.

reply to post by surrealist


I find it impossible to believe that "no one saw this coming". What a load of crap.

Loaning invisible money, and cashing out real money, banking investors new creed, will NOT make John Q. Public wealthy, nor financially comfortable.

This was by design. And I predict (in a real way, not in a HMO way), that there will be an influx of government gigs available to JohnQ. soon. Like bridges and rebuilding court houses. A grant for artists to place their wares on permanent public display.

It was called The New Deal long ago. It's history. It'll happen again.

I love how everybody is giving detailed analysis of the situation.

It's Economics 101.

Too much money chasing fewer Goods = Inflation.

Now, anybody hear of Countries printing Money lately?

Originally posted by Tw0Sides
I love how everybody is giving detailed analysis of the situation.

It's Economics 101.

Too much money chasing fewer Goods = Inflation.

Now, anybody hear of Countries printing Money lately?

Sure.. We;ve heard of printing money. They've been rolling the presses night and day since Bush kicked them in the butt back in late '06-07. It's a fine idea, isn't it? If there isn't enough cash and the debt is too high, just print more! Well, why wouldn't everyone just do that? I have one ...well.. a billion..reasons.



That is what money prints like after enough time of using printers to solve national debt problems. I wonder what President.....for the Billion dollar bill..Oh, heck. It's a no brainier, huh? Obama!

Originally posted by TheMindWar
Hahaha clueless, what a joke. How can you be clueless when you engineered the problem in the first place.

Look at it this way, they know they have been committing massive fraud for decades. And they got away with it because it was hidden from public scrutiny. Now we know they have committed this act of financial terrorism thier only option is to go to jail or male thier fraud legal.

The inly eay they can make what they have done legal is to give themselves immunity from prosecution. And the only way they can do that is to commit a financial takeover of democracy.

And this is what we are seeing, when are people ever going to admit this fact?

good post, they know exactly whats going on since they made it manifest itself. it was the plan all along, steal their money out the front door and when we crash it, sweep in like white knights and steal the rest out the back door for pennies on the dollar, or by then the 10,000 dollar bill.

Of course it's coming. These guys can't paper over real issues. They must be addressed. The paper is just trying to hide the mess, but it's still there.

What is this mess? Many things colliding into a cluster#.

We've got peak resources interacting with "technological progress", climate change, and dysgenics.

Whether conscious or not, the bankers actions seem to be aimed at keeping the higher classes flowing, while enacting policies to soft kill the lower classes, and control any uprising.

It's a culling of our species, as far as I can tell.

We either do this in a controlled way, else nature takes care of it for us. If we allow nature to do it, civilization as we know it may not remain when it's all said and done.

I have no judgment over this all. Am in no position to do so, or at the very least make an actual dent of change in the events unfolding.

A new institution that both developed and emerging economies can trust should be created. One possibility is to institutionalize the G20. As these economies are two-thirds of the global economy, their coordination could be effective.

I like it, in a way a lot of the hard work is already done with the G20 getting policy control over the IMF about a year or so ago. I can very much appreciate that as the G20 has been working with the IMF, the challenges of responsible macroeconomic policy is coming to light and more resources are needed.

So would this new organisation become like a Beuro of Global Economy? Would it suck in the World Bank and Bank of International Settlements as well? The G20 nations have demonstrated their capability with economic management, it is a big part of that club. Also with different nations providing review it prevents one nation capitalising at the expense of others.

Originally posted by GD21D

The Federal Reserve didn't see the U.S. subprime-mortgage crisis coming. The European Central Bank was clueless about the euro zone's debt crisis before it hit.

I have an issue with this as I believe they knew exactly what they were doing. These men don't get to the positions they are in by being clueless. Their motives can be left for another debate

They are psychopaths. they take unreasonable risks because they don't feel any concern or empathy for other Humans. They will even take risks that have the potential to destroy themselves simply to see what happens!

That is why all this is happening. By their very nature, ruthless psychopaths get to these positions in society through their attitudes towards others. They are able to make a decision that may harm millions but get them some profit, and they are seen as successful and rewarded for their psychopathy.

I've been saying for years that we are idiots to trust these people. The same people who are making these decisions now are the same people who never saw any of this coming, or they did see it and they chose to allow it to happen.

There are only two explanations for what happened, either the IMF, World Bank, and Central Banks and governments all over the world saw this coming and did nothing, or they never saw this coming.

Either way we look at this the people who are STILL making these financial decisions should NOT BE IN THEIR POSITION.

They either catastrophically failed in their one task, or they are catastrophically corrupt and should probably be dragged from their offices and hung in public.

Originally posted by detachedindividual

Originally posted by GD21D

The Federal Reserve didn't see the U.S. subprime-mortgage crisis coming. The European Central Bank was clueless about the euro zone's debt crisis before it hit.

I have an issue with this as I believe they knew exactly what they were doing. These men don't get to the positions they are in by being clueless. Their motives can be left for another debate

There are only two explanations for what happened, either the IMF, World Bank, and Central Banks and governments all over the world saw this coming and did nothing, or they never saw this coming.

my opinion, not only did they see it coming, but they are planning on pulling the plug in this fake economy by years end, once they have reaped all they can from us. the dollar will collapse as the world currency reserve making America ripe for the taking along with many other sovereign nations, it's all a game to these psychotic bastards, but real people will suffer real losses.

reply to post by LittleBlackEagle


They're not psychotic. I doubt they're psychopathic, either.

Originally posted by unityemissions
reply to post by LittleBlackEagle

 

They're not psychotic. I doubt they're psychopathic, either.

some of the most intelligent and successful people in our history, were one or the other.

reply to post by LittleBlackEagle


True, but that tidbit doesn't help your case.

At worst politicians and bankers are sub-clinical psychopaths. You have to be pretty detached from your average individual to make macrosocial decisions effectively. They are best suited for the positions. If anyone in this picture is a little psychotic, it's CTers. They just don't seem to integrate enough factors correctly, yet need to know so badly that false.judgment and illogical assumptions are made in place of knowledge and wisdom.

reply to post by detachedindividual


Quite a few had seen it coming, tv was giving its warnings a good 1-3 years before it happened. In the progress from government regulation to market regulation, quite a few took advantage of the lax situation. Many involved diversified their risk around the world as they knew things where catching up. To them, economic management was about getting the most numbers in a highly competitive environment.

Psychopath and sociopath tendencies have no fixed guidelines and generally follow more of a scale, just because someone hacks up his visitors does not mean they would also rip off millions of dollars. Crime is an unfortunate consequence of self determination and survival. We all have choices to make as we try to understand our environment and respond as best we can.

While not common in the general population, these tendencies do start to rise as they are more competitive, impulsive and effective at sorting out some problems. Be aware, they could be anywhere...