Inflation and in particular food price inflation is now a major concern for governments and people all over the world.
Peter Schiff the President of Euro Pacific Capital for a very long time has been warning people around the globe that we are facing a pending inflation problem and that that problem is now here right on our doorstep.
The first place that you are likely to see inflation is in commodities in particular agricultural commodities and precious metals which are the most sensitive commodities to inflation.
Politicians always want to blame inflation on the weather, speculators, greedy corporations, labour unions and more when it has nothing to do with these factors, it all comes down to money supply and government stimulus packages and quantitative easing.
Inflation is actually a consequence of what the governments of the world have done to try and stimulate their economies by running huge deficits.
As an example, In the USA the Federal Reserve has been printing vast amounts of money to buy up US treasuries which in turn expands the money supply and diminishes the value of the money already in the system, this causes prices too inevitably rise, and currently this is exactly what is happening.
Some people are of the belief that faster the economic growth in countries like China is, the more inflation rises.
This is total hogwash.
In fact the more economic growth that a county has the less inflation it has especially when you are measuring inflation by prices.
When an economy is growing essentially they are growing their production, producing more goods which in turn places downward pressure on prices.
Rising inflation is always seen in economies that are stagnating or even contracting, where they are producing fewer goods that you have an upward pressure on prices and a resulting inflationary problem.
The real reason for inflation is the governments of the world are inflation their money supplies. The word inflation literally means “To Expand” and what is expanding is the money supply.
As money starts to lose its value prices have to rise.
But let’s make something quite clear here, it is not that the prices of goods actually rise, because essentially they don’t, although it looks as if they have done when you make a purchase, it is really that the more money that is printed the less buying power each note or coin has, resulting in you having to hand over more notes or coins for the products that you wish to purchase.
The prices for products do not rise as much as the value of the money used to purchase them decreases, meaning you have to hand over more money to acquire your products.