The price of noodles in China: A parable of inflation & deflation

I originally posted this story to the very nice bitsofnews.com. I’ll try to write for them regularly, and will cross-post my contributions here.


China gets a lot of attention for its policy of keeping its currency cheap with respect to other countries’ money largely by printing local cash to buy up foreign exchange. Usually when countries ramp up the printing press in support of some state policy or another, the result is high inflation. Not so in China, which — so far — has been expanding its money supply at a heady clip with only very moderate inflation. But perhaps this story in today’s New York Times is the canary in the coal mine?

Noodle Prices Rise, Along With Chinese Tempers

…So in February, as noodle patrons across the city arrived for their morning fix, an unexpected notice awaited them: The price of a bowl of Lanzhou pulled beef noodles was going up. A large bowl, once only 27 cents, would now cost almost 31 cents… “Beef Noodle Price Hike Touches Off Nerves Everywhere!” declared The Western Economic Daily, a feisty local paper.

But, wait a minute, not so fast…