Rethink the economy – start locally before going global

In light of the global nature of the economy, the United States needs to rethink the entire scheme.

“China's Stubbornness Could Make Inflation Worse

BEIJING (AP) — After announcing steps to curb surging food prices that are stoking public anger, China's leaders face the challenge of curbing simmering inflation pressures throughout the economy without derailing its recovery.

The double-digit jump in food costs that Beijing vowed Wednesday to tamp down is a symptom of widespread, growing price pressures, rather than the cause, analysts say.

They blame a flood of bank lending and say communist leaders need to hike interest rates and tighten credit before price rises in other parts of the economy pick up.

"The government needs to do a lot more than it was prepared to," said Standard Chartered economist Jinny Yan.

Wednesday's announcement highlighted the contrast between China, which recovered quickly from the global recession and is trying to cool inflation, and the United States and other major developed economies, which are trying to shore up growth.

Beijing said it would impose price controls if needed on basic food items, boost vegetable production, give food subsidies to poor families and release stockpiles of grain, cooking oil and sugar. That came after food prices in October jumped 10.1 percent over the year before, pushing inflation to a 25-month high of 4.4 percent.

Food prices are sensitive in a society where families spend up to half their incomes on food and communist leaders see them as a trigger for possible unrest. But the flood of bank lending that supported Beijing's stimulus also fueled real estate and stock speculation that pushed up housing costs at double-digit rates early this year.

At a Beijing market on Thursday, a 64-year-old retiree who would give only her surname, He, said she is coping by eating more low-cost cabbage. She said she has rented a garden plot outside Beijing to raise cucumbers and green vegetables.

"These vegetables are too expensive!" He said, pointing at a table loaded with tomatoes.”