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Saturday, May 31, 2008

Vietnam's inflation crisis

Vietnam is in an inflation crisis (source: wsj). The government said this week the inflation rate in May was 25.2% on an annual basis, up from 21.4% in April and 14.1% in January. What happened in Vietnam today reminds me of the two great inflation in China: one in 1988, which partly led to the Tian'anmen Square incident of 1989, and the other one during mid 1990s, which ended up with deflation near the millennium. 
 
With soaring food and energy prices, I am not so much worried about inflation in G7 countries.  But I am truly worried about inflation in those emerging economies, where governments/central banks have little experience fighting inflation and the evil of inflation is often played down as a byproduct of high growth or the so called structural inflation.  Well, every country should learn the lesson by themselves. I hope China's policy makers are better prepared this time.