Mo' Money, Mo' ProblemsIssue: July-Aug 2008
RISING PRICES in commodity markets have caused alarm, protests and even violence in places as diverse as Egypt and the Philippines. Even in wealthy nations, higher prices for fuels, foods and raw materials are squeezing consumers and businesses, at times painfully so. The cause of this problem is fairly obvious: higher demand from the world's emerging economies, coupled with the usual growth in mature markets. The effects-and the solutions-are more complex.
Inflation doesn't exist in a vacuum. It is the rise of one price in terms of something else, be that how much you earn, the time it takes to procure what you're buying or simply what other desirable things cost. If all prices and wages rose at the same time, you wouldn't feel much of a difference. But when the prices of a few key products rise without a corresponding increase in wages, you feel the strain on your budget.