The Globalist: The search for a new global equilibrium: “Waiting for Constantine”

Mirtchev, A. & Bailey, N. (2011, March 24). The Search for a New Global Equilibrium: “Waiting for Constantine.” The Globalist. 

The GlobalistIn the wake of the global economic crisis, the world is trying to chart an economic path to the future and find a “new normal.” As Alexander Mirtchev and Norman A. Bailey explain in the first installment in their series “The Search for a New Global Equilibrium,” inflation as a factor of global economic security has the innate capacity to upend carefully laid plans and further upset the equilibrium.

The bottom line is that, irrespective of various policies, in the West to the BRICs and elsewhere, inflation concerns are surfacing worldwide. Although U.S. inflation seems to remain within the forecast range, with persistent unemployment keeping labor wage demands at low levels, rising commodity prices and other inflationary pressures are applying opposing pressure.

Inflation in Britain rose to 4% in January 2011, double the government’s target. European Central Bank inflation forecasts, although more optimistic than those in Britain, were still raised to 2.3% from 1.8% on the back of oil price hikes. But in certain countries, inflation has leaped over the EU average, such as the 3.2% registered by Belgium in January 2011.

In the world’s rapidly developing economies, the situation is different — but the bottom line is similar. China’s whirlwind return to growth has been accompanied by rising consumption and wage pressure. When combined with the ongoing weakness of the Chinese currency, it is hardly surprising that, according to government figures, price levels climbed 4.9% year-on-year in January 2011.