Asia Soaring Wages Stoke Inflation as Factory Costs Rise - Bloomberg
Koda Ltd (KODA). Executive Director Ernie Koh has a message for clients in 50 countries who complain about the Singapore-based furniture maker’s first price increase in two years: Take it or leave it.
Koda’s factories in China, Malaysia and Vietnam are battling rising costs as governments in Asia increase minimum wages to curb discontent over a widening wealth gap. While weak global growth and increased competition limited the ability of producers to raise prices during the past five years, Koh says they can’t go on absorbing the additional expenses. — Bloomberg
China's Wage Hikes Ripple Across Asia - WSJ.com
These are the stories that convince me that the Fed’s policy of easy money will eventually come home to roost. China’s economy is changing just as much as ours.
Rising wages will result in higher global inflation and will trigger a giant global margin squeeze in the medium-term and the top of the Treasury market in the long-term.
I view recent upward movements in Treasury yields as buying opportunities. Consumers’ purchasing power remains weak. Any increase in prices on the commodity/raw material side will be met with anemic debt plagued consumer demand. Companies have the most to lose here as their historically very high profit margins are at serious risk of mean reverting.
Wage dynamics also alert me of the risk of sticky inflation. Stagflation will be a problem for emerging market economies for the foreseeable future in my view.
Spain - the fifth victim to fall in Europe’s arc of depression - Telegraph
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I completely agree with this statement. It leads to the common sense conclusion that forcing austerity on peripheral citizens, the majority of which had nothing to do with these practices, in the name of fiscal responsibility is downright apocryphal and unethical.
Let capitalism work.
China keeps experiencing inflation. (Click here)
Rising prices at the pump will force firms to raise prices to keep margins at healthy levels (oil is omnipresent in the production/transportation process). However, as they raise prices, workers will need to pay more for those items. They will go to their employers to push them to raise wages so that they can afford the price increases…
and around we go. This is a positive feedback loop and is why inflation is difficult to extinguish. China’s inflation problems will remain present for sometime imho. Authorities will be forced to raise rates or let the Yuan appreciate.
Inflation in Emerging Markets
This is a good article on how low spare capacity in emerging markets, coupled with strong growth is causing all sorts of headaches for government officials in those economies.
