Is U.S. Making Emerging Nations Stronger?

Why is the rate of inflation so low in the United States when the government has pumped huge amounts of debt into the country and the Federal Reserve has loaded the financial system with large amounts of liquidity? The same question was asked in the 1990s. Where was the United States inflation? The answer for the 1990s… and for the present time period… is that the United States has exported inflation to the rest of the world, more specifically, Asia. As the accompanying chart shows, inflation seems to be heading up in Asia… as it is also heading up in many other emerging nations. As reported in the LEX column of The Financial Times yesterday, global inflation has seemingly bifurcated. In the developed countries the current inflation rate is below 2 percent (Australia and the UK are exceptions). Morgan Stanley expects a 1.5 percent rate of growth for the wealthier countries in 2010. By contrast, the emerging market inflation rate is about three times higher—expected at 5.4 percent in 2010…