Notes

The Twin Menaces of Inflation
This week, a storm of bad news gave markets cold feet, leading to Friday's 250-point loss. While this pattern of volatility has been the status quo for stock exchanges worldwide for the higher the main year-to-date, another factor has caused at least as many difficulties for a much bigger percentage of the global population: the recent skyrocketing prices in energy and food. Wheat and other cereal prices have significantly more than doubled this season, causing widespread effects which range from speculative overbuying, which exacerbates the issue, to food riots in lots of poor countries. An incredible number of children around the world are likely to suffer from malnutrition in coming years if prices stay at or near current levels, in accordance with International Monetary Fund (IMF) estimates.

more info of this unfavorable price increase has been because of shifting ideas about energy consumption and the press towards the usage of alternative resources of fuel other than gasoline: namely, the subsidies issued by many governments of developed countries to improve over to ethanol along with other plant-based hydrocarbons, such as that created from palm oil (an especially environmentally destructive process for ecosystems). Since these subsidies and programs have been introduced, farmers tend to be able to make better returns by selling their crops to biodiesel companies than to food companies. Until economic incentives change, the supply end is unlikely to provide solutions. For many of these farmers, these developments mean they could make a decent living for the first time in years, plus they desperately want to (even if it results in local food shortages sometimes).

While this widespread problem affects consumers across the world, these micro effects are only 1 / 2 of the story for gas-sensitive American consumers. Energy prices have taken headlines this year because of speculation and supply concerns from OPEC and South American countries after hitting the psychologically important $100 a barrel mark for the first time in the third quarter of 2007. Crude prices remain stubbornly above historical trends, even while suppliers contend that output do not need to increase. Analysts also have projected US gasoline prices to climb above $4 a gallon during the summer, another equally unprecedented number that could be tough pill for consumers to swallow, after the one-two punch of a national housing slump and the global credit crunch.

Should oil suppliers continue steadily to maintain current output levels, demand is eventually likely to contract. However they aren't the only real links in this chain. If oil becomes a less attractive option to Americans, oil companies may eventually cost out of the market. Many have already been keeping an exceptionally low profile in recent months. Auto companies play an enormous part along the way, but shrinking sales and looming layoffs will probably raise the pressure towards manufacturing lower-emmission vehicles. But the single biggest mover and shaker could be the government, which has the ability to regulate both inflation (through the FEDs influence on mortgage interest levels) and the move towards more sustainable technologies. The next US president can realize your desire to help determine how long the lone superpower continues to expose its Achilles heel, but at some point all eyes will undoubtedly be on the Federal Reserve if inflation once more rears its ugly head.

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