Why does inflation increase almost throughout the world?

Question

Why does inflation increase almost throughout the world?

Answer 1

The main reasons:

a) the shortage of petroleum oil reserves and the capacity to produce oil together with the fact that only few countries form a kind of Oligopoly cartel in the face of growing demand for petroleum consumption, leads to sharp rise in oil prices, that leads to rise in downstream petrochemical product prices and rise in transpotation costs thus pushing up prices of all other products in a spiraling process. No country can afford to reduce the consumption of petroleum oil and its products without hurting its economic condition : so all are hurt.

2. The petroleum producers are raking in huge amount of hard currency by exporting oil at rapidly rising prices while their costs are very low, resulting in higher demand for other products by them in the international market pushing up market prices and the tremendoud liqiudity they have is pushing up world money supply and generating inflationary pressures in whichever countries (currencies) they keep their foreign exchange reserves in.

3. Not all countries are self sufficient in producing all foodgrains they need to consume. For many food commodities, a few large producing nations supply them to different other countries: like major exporters of wheat are Canada, Australia and US while major exporters of Rice are Vietnam, Indonesia, India, etc. Unfortunately there was crop failures and supply bottlenecks resulting in fast rise in foodgrain prices especially as the people in countries like China, India and other emerging countries with big population are increasing the standard of living of the people below the poverty line resulting in sharp growth in demand for food form those who could not have two square meals a day. Also, in countries like USA agricultural land is being diverted from foodgrains production to bio fuel production resulting in lower supply of foodgrains and rise in prices.

4. There is a shortage of shipping services (containers) and port infrastructure in many countries in ciomparision to the demand placed by fast groth in international trade. This has led to rise in freight costs that feeds into the prices of goods that are traded all accross the World.

5. Monetary policies of developed countries are not turning adequately tight and the emerging developing countries are adding fuel to the fire by keeping their currencies low.