It interesting to see ads for American designed cars on English television. It is almost as if the European market were about to export production to America, and you wonder how the States could recover their competitive position in the automobile industry. Well, we know that what goes into cars comes from a world of sources, literally. But, it makes you think when you realize just how weak the US dollar has become over George Bush's tenure at the White House. So, inflation is not about the cost of things American, but the cost of raw materials.
Well, it would seem to me that we have at least four negative things going on that would feed an inflationary binge. We have:
- High energy prices , particularly, oil prices which will feed into just about every industry. Transport intensive industries are but the start. Gone may be the days of strawberries from Chile on the shelves of British retailers, but I could be wrong. There are just some things that people will buy no matter what the price.
- Growth in national and international money supply well beyond what is called our real economy production, which is goods and services. You know this has to happen during a world crisis in the form of a credit crunch that threatens to deflate the world economy by downward pressure on the marketable value of big things, such as houses. Governments are keeping interest rates affordable so that we don't have further deflation in property values. They are in fact inflating the economies until real demand and monetary demand get into balance. This could take some time.
- People clawing back the real value of what they have been used to, even though their economy can't afford it. Oh yes! Strikes and civil discontent with a general feeling of malaise. Possibly, there is a feeling of being suffocated by the cost of living not retreating. As people are forced to save in real terms, i.e. they can't afford to live as before, they actually save, which means they pay more and profits for things are siphoned out of the economy to pay for energy. The likes of Shell, Iran and Iraq become wealthier while property owners and consumers struggle much harder to keep what they had.
- You wonder how much it costs to build an army these days. Well, we are now paying for military purchases in the future. We are saving for an almighty war preparation effort. Those that will be buying are the energy exporters, who are creating tourist areas in the sun while negotiating arrangements for self protection. Armies and miltiary build up these days can be bought. Our terrorist people may even be receiving some of this money.