China’s industrial revolution over the past 35 years is probably one of the most important economic and geopolitical phenomena since the original Industrial Revolution in the 18th century. The rapid growth has puzzled many, in part because China tried and failed at this transformation before. What was the “secret” this time?
Since 2009, percentage growth in GDP has been the highest in Asia and Africa and the lowest in Europe, followed by North America. The mediocre performance on the latter two continents could have something to do with their advanced and open financial systems, which might have made it easier for the global financial crisis to spread through them.
Despite the theory of global economic convergence, few developing countries have actually been able to catch up to the income levels in the U.S. or other advanced economies. They remain trapped at a relatively low- or middle-income level.
A look at food prices in the two countries helps to explain the increasing correlation in their inflation patterns. One reason why their food prices are moving together is the increased trade between the countries.
In contrast with many people’s expectations, the Fed’s injection of $3.5 trillion into the economy caused no significant inflation or increases in the price level. There are many possible explanations in the mainstream; an alternative is a liquidity trap.