Among the economic havoc
wrought by turmoil in the Mid East and severe weather around the globe has been
the impact upon inflation and upward pressure on prices for raw (and core)
materials. Today, most economists and
market analysts fear that this confluence of factors could accelerate inflation
in energy prices, foodstuffs, and industrial materials, thus undermining a
nascent uptick in consumer spending, global trade, and consumer confidence.
Over the past few months,
rising demand has put welcome pressure upon producers, forcing inventories down
and production schedules to accelerate.
Should the current climatological and political pressures exacerbate,
the potential impact might not only affect energy and food prices, but any hope
of congruent development in the emerging markets.
Like gold before it, the price
of oil gyrates not only to a fundamental beat, but also to the whims, worry,
and fanaticism of politics, consumer confidence, and investment
speculators. Obviously, any interruption
in the supply chain caused by political unrest, multiplies a swing in price
pressure geometrically.
Laisser-faire.
Wall Street remains
“non-plussed,” however. Acceleration in
energy prices, basic materials, and worry yields a daily dose of upticks and
portfolio capital gains.
Grim news from the Mid East
makes energy soar, intensifying the vortex that squeezes consumers on one hand
while generating positive alpha on the other.
Obviously, federal treasuries
worldwide must deal with these inflation pressures or risk sending their
economies into a tailspin. This dilemma
underscores the fragility of an early recovery whose underpinnings are eroded
by the slightest tremor of consumer doubt.
These doubts are exaggerated even more in developing nations where
resources are not as plentiful and reserves are not as deep. From China
to Chile , Bahrain to Brazil
Facts or fantasy?
Whether one is to believe
objective inflation data concerning prices, production and inventories,
speculators and market-makers will have a field day betting on prices in
response to any perceived threat.
Over time, “hedges” will magnify
the risk by testing the outer cyclical limits of stochastic measurement. This puts the markets into precarious risk by
leaving prices nowhere to go. The sky is
not going to fall by this observation, but at some point prices might. If not, certainly consumer spending and
confidence will.
From food, energy, tuition,
transportation, clothing, entertainment, and healthcare, prices are rising,
forcing moral life-and-death decisions upon the public. Food or medicine? Mortgage or tuition? Transportation or employment?
These extremes are too extreme for some.
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