World Economic News
'Super-Inflation' Feared by Some in Financial Establishment
Money printed by central bankers is fueling oil prices and causing "super-inflation" for other commodities as well, fears a certain faction of the financial establishment, according to a feature in London's Financial Times Aug. 18. The Times refers to a "small but influential" group of people, that contrary to the majority of economists, who are fixated on supply-and-demand questions, "blames loose monetary policy in particular for the current high level of oil prices." As an example, new Bank of England Governor Mervyn King has "conceded that aggressive rate cutting may have contributed to the rise in commodity prices, including oil."
The previous week, King said: "I think there has been an expansion of money and liquidity around, that does lead in general to an increase in asset prices, of which commodities prices are one." Eric Barthalon, chief economist at Allianz Dresdner Asset Management is being quoted, saying: "We are in a situation where the U.S. current account deficit is not financed by foreign private savings but by global money creationmoney is being created out of thin air. The markets that are most likely to react the fastest are commodity markets." In respect to metal markets, some people are now spreading the term "super-inflation."
Since the beginning of this year, oil future prices have risen by 45%. Since the low in 1999, oil prices have more than quadrupled. Nickel prices have doubled within two years, steel prices are up 60% in the same time period. Prices for hot-rolled coil have increased 87% just since the start of the year. Industrial producerssuch as in the automobile and construction sectors, chemistry, glass and paper manufacturersare reporting the worst rise in material costs in 40 years.
Meanwhile, both in the U.S. and Europe, hundreds of statistics experts, supported by incredibly sophisticated computer programs, for calculating all sorts of "adjustments," have concluded that price inflation now is close to zero, or even negative. On Aug. 18, the European Central Bank claimed that consumer price inflation in the euro-zone slowed to an annualized rate of 2.3% in July. One day earlier, the U.S. Labor Department reported that its official consumer price index (CPI), including food and energy, has fallen by 0.1% during July, that is consumers are allegedly enjoying negative price inflation.
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