One way of determining part of the inflation story for the globe at the moment is looking at Crude Oil prices, when Crude Oil is around 70 dollars or lower inflation is dropping around the globe, when Crude Oil prices is between 70 dollars and 80 dollars ( in U.S. dollars ) inflation is sideways and when Crude Oil is above 80 dollars inflation is moving higher. As of writing this article Crude Oil is around 77 U.S. dollars.
An important point to understand about Crude Oil is that it runs most of the world, high prices of Crude Oil and the world breaks, lower affordable Crude Oil and the world functions, essentially as long as Crude Oil remains low or reasonably low, the world can grow.
“Everyone is effected in some way by the rise in petrol prices, not just businesses that are reliant on transport. Rising petrol prices has a domino effect that effects your ability to drive, food prices, consumer goods, furniture, electronics, everything..”
One way Central Banks control inflation or suppress inflation is by controlling the price of Crude Oil, when they want inflation to cool for a while they will work with financial institutions to try to manipulate the price of Crude Oil lower and when they do not care about inflation they will allow Crude Oil to rise or encourage it to rise with certain restrictive policy’s.
Essentially the price of Crude oil is controlled by global governments..
“Petrol is a essential product that runs the globe, when it is expensive things break, when it is cheap the world functions.”
What is Inflation?
Important to understand that expansion of money caused by Central banks is the number one cause of inflation, some countries around the world such the U.S. expand the money by around 8% to 10% per year, this in turn turns into around 8% to 10% inflation per year. This is why when expansion of the money supply is around 3%, inflation is around 3%. Problem for some countries such as the U.S. is that they cannot expand the money supply at a small rate, why, because of their national debt. Never has their been a closer time for the U.S. to potentially go into hyperinflation than right now, how would hyperinflation be initially caused, well by the Federal Reserve allowing an overexpansion of the money supply, an amount that would become uncontrollable and thus too late to turn back, some would argue that the U.S. is already close to that state, hopefully not because if the U.S. went into hyperinflation it would have massive economic knock on effects for the whole world.
High House Prices Cause Inflation as Well..
I would like to note that their are other assets which effect inflation as well, it is not just petrol ( Crude Oil ), another asset that effects inflation is housing, housing has a huge impact on inflation, when housing is affordable, which it is not at the moment, inflation cools, when it is expensive which it is at the moment inflation is sideways or rises.
Essentially when housing rises in a country people become financially trapped, this is why many are choosing with good reason to leave the west and move to more affordable housing locations in the world. Also as housing is a lagging asset, it tends to drop slower than other assets at or drop only near the end of an inflationary cycle.
