World trade prices are currently falling at probably their fastest pace since the dark days of the Global Financial Crisis and, in so doing, they are imparting a significant deflationary bias to the world economy. We find that even in some of the world's strongest economies such as the US and the UK, as well as here in New Zealand, retail prices are either simply falling or rising at a much slower pace than many would have expected. The ultimate cause of this deflation is North Asia’s inability to reform and dismantle its once heavily protected and favoured manufacturing sectors at a time when the Western economies no longer possess their onceinsatiable demand for imports of consumer goods. Certainly, Japan, China and Korea each relied on their respective manufacturing sectors for their initial economic development but these models have been allowed to persist for too long; the nature of the world economies has changed but these countries have not yet been able to adapt to these new circumstances, with the result that some considerable part of their recent output growth has simply found itself piling up in unsold inventories.
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