China problem

Then there is China. With apologies to Chico Escuela, it’s
easy to laugh when the fictional Hispanic baseball player parodied
on Saturday Night Live observes repeatedly that “basebal
bin berra, berra good to me.” Well, for most Americans, the
punch line would have to be “China bin berra, berra good to
me.” But it will be no laughing matter when China stops being
berra, berra good to us.
China, like many of the other emerging market countries in
the world, has been a big contributor to America’s successful fight
to check inflation. Americans have paid less for the goods from
emerging markets, which means prices here have not risen as
much as they might have. Despite all the criticism of China for
taking away American jobs and competing unfairly for market
share, millions of Americans have benefited from lower prices
and the victory over inflation.
But that will change as China’s economy develops, as its workers
get paid more, and as it starts to unwind and reverse a currency
policy that has been very helpful to the United States. How much
disruption that will cause is debatable, but the unraveling of this
special relationship could push both interest rates and prices
higher in the United States.