Just by reading this blog, you may be fuelling inflation

June 13, 2008

U.S. Treasury Secretary Henry PaulsonSoaring energy and food prices are the top concern at the Group of Eight finance ministers meeting in Japan this weekend, while central banks are keeping their fingers crossed that they can find a solution without killing off shaky economic growth.

U.S. consumers’ mood plunged to a 28-year low in June as soaring inflation pinched at their purse strings.

High petrol prices pushed U.S. inflation up to a six-month high of 4.2 percent in May, a trend seen even more starkly across the Atlantic, where inflation is at a record high of 3.6 percent in the euro zone and a near six-year high of 3 percent in the UK.

But some economists warn that blanket media coverage is only making the matter worse and feeding a vicious circle.

Every news story makes shoppers and investors feel more pessimistic about their loss of spending power, pushing up inflation expectations and ultimately maybe making central banks more likely to take action by raising interest rates. 

“It’s not exactly chicken and egg but you can’t help feeling it creates a kind of hype, and people often believe the hype,” Dresdner Kleinwort analyst Rainer Guntermann said.

    

One comment

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If the world economy is totally reliant on the health of a single currency then the collapse of that currency will inevitably affect almost everybody. The oil price is not rising. The US dollar is being revalued at its proper level against all basic commodities, as a result of the excessive issuing of dollars to pay for the Iraq and Afghan wars and fuel the expansion of the US economic bubble.

While the US economy and economies dependent on it continued to expand there was not problem but a bubble cannot expand for ever and this one has finally burst. We now have to pay for the reckless gambling of bankers and politicians who thought that they could play get rich quick games at the expense of the rest of the world.

Posted by Antiqua | Report as abusive