China's efforts to stabilize commodity prices should help the U.S. avoid a worst-case scenario.
China's recent initiative to halt the rise in commodity prices is bound to also help contain the prices of a wide range of durable consumer goods that countries like the U.S. import from China.
Credit: Faungg via Flickr
AMHERST – The fiscal expansion in the United States in response to the Covid-19 pandemic is like nothing seen outside of wartime. Further large-scale public spending will be needed to rebuild needed infrastructure, tackle climate change, and create jobs. But some prominent economists are warning that government spending on such an extraordinary scale could fuel accelerating price growth and cause inflation expectations to become unanchored.
For more than three decades, expectations of moderate price growth in the U.S. and other advanced economies have been sustained — not least by China’s integration into the global economy. Might China come to the rescue as the Biden administration seeks to open the fiscal floodgates?
There are certainly reasons to be wary of price risks. At the core of Biden’s initiative are infrastructure investments, which require materials such as steel and copper. And, in 2021, commodity prices have soared, triggered by supply-side bottlenecks
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