Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Well, it is certainly true that resource utilization in certain industrial countries— Japan, for example—is moving in that direction. Even Europe to some degree is moving in that direction. For the major emerging-market economies of India, China, and so forth, where we have seen the big increase in the global labor force that has been thought to lie behind some of the downward pressure on wages everywhere and some of the flatness in finished goods prices, I am not so sure I did get a sense that we are reaching some kind of capacity constraint.

If anything, China surprised everybody in Q1. The numbers that they released are on a sort of Q4- to-Q4 basis. We translate those internally and, therefore imperfectly, into quarter-on-quarter changes, and so we have Chinese Q1 growth that is a 12, 13 percent rate. I do not see any sign that China is slowing. The whole debate about a hard landing in China is just gone. So in that sense, I do not really see that we are hitting global constraints where it most matters.

We probably do have a permanent terms-of-trade change—or at least an extended, persistent terms-of-trade change—in terms of raw materials as a result of a change in the composition of global growth, and I do not think the composition of global growth has to go back to being almost all industrial countries with most emerging market countries barely growing. I do not see that happening. The countries that have enjoyed terms-of-trade gains because they have commodity resources are probably going to continue to enjoy them; and what they do with those resources, how they choose to consume them, or what they do with domestic investment will become, I think, an important factor in this notion of global capacity.

I do not have any real new news on port capacity, bottlenecks, or shipping rates; but since nobody has been talking about these subjects for quite some time, I take no news to be good news, and I do not think bottlenecks in that area have contributed much to what we have been seeing lately.

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