I was reading an article today on Seeking Alpha where the author was talking about inflation. His point was, that the US continues to inflate (we are talking about monetary inflation here), and that all other countries are forced to inflate in order to maintain some semblance of world trade.
This phenomenon has basically allowed the US to push its inflation out onto the rest of the world, and enjoy the ability to run massive trade defecits, by virtue of of the USD being the worlds reserve currency.
I have said often recently that this may not be for very long. The interesting thing is, that few actually make the connection in what is happening to currencies all around the world, because so many are still trading the currency markets.
What I think so many are misunderstanding, is that its not just the USD thats in trouble, its all fiat currencies around the world. They are all sinking. They are all inflating.
Dont believe me?
June 5 - Bloomberg (Simon Kennedy): “Asian governments are falling behind in their battle against record oil prices, risking public protests, higher interest rates and slower growth. Indian Prime Minister Manmohan Singh and his Malaysian counterpart, Abdullah Ahmad Badawi, relaxed fuel price controls yesterday, joining Indonesia, Taiwan, Pakistan and Sri Lanka in boosting costs for business and consumers. The moves will drive India’s inflation to 8.5%, a 13-year high… Malaysia’s consumer-price growth may double to more than 7% this month… Central banks in the region may also follow Pakistan in raising rates, as policy makers lose bets that a global slowdown would temper price increases… This is going to cost these governments politically,’ Michael Spencer, Hong Kong-based chief economist for Asia at Deutsche Bank AG, said… ‘The governments are basically saying they can’t keep subsidizing fuel.’”
June 4 - Financial Times (John Burton): “Malaysia will raise petrol prices by more than 40% from Thursday as it seeks to rein in government spending on fuel subsidies at the cost of ending a low inflation policy. Government officials said Malaysia was in danger of spending M$50bn ($15bn) on fuel subsidies this year if government-set prices for petrol and diesel were not raised… Before today’s increase, Malaysia’s fuel subsidy accounted for nearly a third of total government spending and was equivalent to about 7% of gross domestic product… The fuel price increase was bigger than those recently announced by Taiwan, Indonesia and India, which raises its fuel prices by 10% from Thursday.”
June 4 - Bloomberg (Kartik Goyal and Soraya Permatasari): “India and Malaysia were forced to raise fuel prices after crude oil almost doubled in a year, risking fanning inflation and social unrest. Gasoline will rise 11% in India’s capital New Delhi… Pump prices in Malaysia will increase 41%… Asian nations are grappling with record crude prices that have raised the cost of subsidies and caused losses for refineries… ‘The countries in Asia, which are dependent on imports, will have to live with the specter of accelerating inflation and slowing economic growth this year,’ said Kaushik Das, an economist with Mumbai-based Kotak Mahindra Bank Ltd.”
June 3 - Bloomberg (Sungwoo Park): “South Korea, struggling to rein in the highest inflation in seven years stoked by surging oil and food costs, may release rice and frozen fish from state reserves and intensify a crackdown on steel hoarding to cool prices.”
June 3 - The Wall Street Journal (James Hookway): “A proliferation of labor strikes in Vietnam is dragging foreign manufacturers into the country’s worsening inflation crisis, while Hanoi’s Communist leaders struggle to keep rising prices under control… The strikes reflect the anger of the tens of thousands of Vietnamese who have left rural farming communities to seek work in the new industrial zones around Hanoi and Ho Chi Minh City, only to see the buying power of their wage packets dwindle amid rising food and fuel costs. According to government statistics, about 300 strikes took place in the first quarter, up from 103 strikes recorded in the first quarter of last year.”
June 6 - Financial Times (Simeon Kerr): “The sovereign ratings of Middle Eastern states could be hit by the political and economic risks caused by soaring inflation across the region, Moody’s…said… Poorer regional states, such as Egypt and Jordan, are most likely to be affected in the short term, as inflation prompts strikes and fiscal loosening by governments under pressure… ‘Given enhanced sensitivities to the risk of social unrest, some governments in the Middle East are finding it difficult to maintain fiscal discipline,’ said Tristan Cooper, Moody’s senior sovereign analyst…”
June 3 - Bloomberg (Fiona MacDonald): “Kuwait will tighten controls on prices and increase subsidies on staple consumer goods, the state-run news agency KUNA reported… Inflation in Kuwait accelerated to a record 10.1% in February…”
June 2 - Gulf Times: “Though the Arabian Gulf is reaping a windfall from sky-high oil prices, soaring food prices have hit countries such as Saudi Arabia, Abu Dhabi and Qatar hard. The Gulf nations have to import more than 80% of the food needed for their rapidly growing populations. To brake the runaway inflation that is fuelled by high food costs, Gulf rulers have a new strategy. They are buying unused agricultural land in countries such as Pakistan, Thailand, and Sudan and turn to large-scale farming.”
June 3 - Bloomberg (Matthew Brown): “Abu Dhabi plans new measures to control price and salary increases as it seeks to curb inflation, Emirates Business 24/7 reported, citing a government report.”
June 5 - Bloomberg (Mike Cohen): “Rising food prices could fuel political instability that African governments will be unable to contain, said Jacob Zuma, leader of South Africa’s ruling African National Congress. ‘The issue of food prices is actually a time bomb,’ Zuma said at a World Economic Forum meeting… ‘An uprising could emerge. I don’t think there is lots that governments could do.’ Rising food prices have sparked protests across the continent in countries including Kenya, Ivory Coast, Cameroon and South Africa… ‘Oil prices are driving up food in a way we cannot deal with,’ South African Finance Minister Trevor Manuel said… Governments in rich nations must to do more to contain food demand or ‘the wealthy are going to take everything, leaving the poor destitute.”
June 5 - Financial Times (Barney Jopson): “Food prices in Kenya rose 44% in the year to May reflecting a combination of global trends and the after-effects of the country’s post-election turmoil earlier this year. Overall inflation in Kenya rose to 31.5% year-on-year, the highest rate since the early 1990s… Kenya experienced its first small-scale protests over soaring food costs in Nairobi at the weekend, but analysts fear that continued inflation in months to come could stoke more serious unrest among the urban poor.”
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