Global inflation is like a spectre still haunting the world. Since early this year, inflation rate has been rewritten or renewed in most countries around the world, either the developed nations, or the newly-emerged and oil exporting countries.
Singapore's annual inflation rate reached a 26-year high of 7.5 percent in April, Saudi (Arabia) inflation hit a 16-year high, spiraling inflation in Switzerland hit a 14-year high, inflation in the Euro-zone, which has stressed to contain it, and jumped to a 14-year high with the annual rate rising 3.3 percent, while the consumer price index (CPI) in the United States surged 3.8 percent in May, the third month of constant growth in a row and hitting a 17-year high, the consumer prices in Vietnam surged 25.2 percent in May, the highest rate of growth since 1992 and, in Philippines, the inflation rate rose 9-year-high 9.6 percent…
Soaring oil and food prices are most directly ascribed to increased pressures on global inflation, which of course hase numerous other factors. Global oil prices and corn prices have been hitting new highs for weeks or even months, and the prices of principal food crops become more than doubled, whereas speculative capital has played a role in the short-term rise of oil and food prices as the main cause is the stampede of money into the oil and food futures markets.
George Soros, a billionaire financer or an ace hedge fund manger, told US law makers when inquired about the speculation of energy prices at a committee hearing on Capitol Hill, June 3 that the "speculation" of large inflows of speculative capital into the oil and food futures markets (and index funds in particular) is leading to oil price "bubble".
At present, crude oil, which is regarded as a kind of hard assets to ward off inflation, can also make huge profits from its long-term investment. If the US dollar goes on weakening, it is foreseeable that the average cost of living in term of dollar can double in a couple of years.
It has become a real anxiety or "mental anguish" for central bank governors of all nations to tackle the issue of inflation. What is regrettable, however, is that central banks of leading powers on earth fail to take concerted actions, and their non-cooperation "games" relating to the monetary policy have made inflation even more and more serious.
In order to prevent an economic recession, the US Federal Reserve has resorted to such conventional methods as those to lower interest rate and devalue its currency, and adopted a lax monetary policy after the outbreak of sub-prime mortgage crisis, so as to win economic recovery at the expense of the rising inflation both in U.S. and the world at large. Meanwhile, faced with the daily growing inflation, most developed nations are unwilling to take the initiative to adopt the policy of tightening money supply as they fear if they take the moves on their own to raise the interest rate, it would sacrifice their own economic development and be victimized by the US Sub-prime mortgage crisis.
Such non-cooperation games have given rise to joint uplift of commodities prices on global market. When many developing countries are plunged into an abyss of sufferings because of the hefty oil and food prices, more than 800 people worldwide are living at the verge of starvation.
High inflation is bound to harm consumption and investment; it will eventually implicate global economic growth and also jeopardize the world peace and stability. Inflation poses the greatest risk for the current world economy, and is also the primary issue for the governments of all nations. The issue of high inflation that has swept the globe cannot be resolved with the individual or self-centered efforts of a few countries.
Against a backdrop of globalization, any nation cannot be self-centered, and countries the world over should make joint, coordinated moves and adopt the effective policy measures, so as to rid themselves of a state of stagflation, in which inflation is out of control, the economic growth slows down and inflation tends to shot up drastically.
At present, the U.S., as the No. 1 global economic powerhouse, should assume its responsibilities to alter its policy of devaluating the dollar and its excessively-lax monetary policy. And the international community should actively facilitate the diversified payment of oil and food in multi currencies so as to contribute in stabilizing oil and food prices. Meanwhile, the governments of all nations should take essential measures to curb the hoarding and speculation of commodities futures by financial investors.
By People's Daily Online and its author is a special guest commentator to the PD, and a professor with the Institute of Economics & Management under prestigious Tongji University in Shanghai
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