Are We Screwed?

First they blame it on the Chinese and Indians for being richer and consuming more. Then they said it's because of weaker US$ and speculators. Now they say they are not sure what it is.

If the big bosses are not even sure what hit us, looks like we're all gonna be screwed!
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Business Times - 16 Jun 2008
G-8 FINANCE MINISTERS MEETING

Top enemy identified, but no bullet to kill it

No consensus on how to fight soaring inflation, so no plan of action spelt out

By ANTHONY ROWLEY IN OSAKA

FINANCE ministers from the G-8 countries ended their meeting at the weekend on a consensus note that galloping inflation - caused by soaring oil and food prices - has overtaken the sub-prime mortgage crisis as the biggest immediate threat to the global economy. But they were unable to agree on whether the commodity price surge is due to basic supply and demand factors, financial speculation or to dollar weakness.


Four wise men: (From left) Robert Zoellick, president of the World Bank; Henry Paulson, US Treasury Secretary; Fukushiro Nukaga, Japan Finance Minister; and Alistair Darling, UK Chancellor of the Exchequer, at a news conference in Osaka last Friday





In the absence of agreement as to causes, the ministers (from the US, Japan, Canada, the UK, Germany, France, Italy and Russia) were unable to agree on common actions to deal with an inflation crisis that is provoking popular protest across Asia and the developing world. Instead, they handed the oil shock issue over to the International Monetary Fund and the International Energy Agency for further analysis and food issues to the World Bank and other agencies.

If the sub-prime crisis had slid from centre stage in Osaka, it was still ominously present in the wings. US Treasury Secretary Henry Paulson warned that 'the financial system (in the US and in Europe) is still under stress and there will be more bumps in the road ahead'.

A report from the Financial Stability Forum said that 'term money markets in major currencies remain subject to volatility' while 'securitisation markets remain disrupted' and write-downs on sub prime-related losses 'will persist for some time'.

But compared to the sub-prime crisis, which so far has impacted mainly large financial institutions and made its wider effects felt only in the housing market, the dramatic surge in oil and food prices is having a much wider political and social impact. While this issue dominated the final communique issued at the end of the two-day meeting, the finance ministers seemed to be at sea over how the challenge should be dealt with.

The reports that they want from the IMF and IEA on oil prices will not be ready until the IMF and World Bank annual meetings in October and, by then, the fallout may have reached crisis proportions, analysts said.

The G-8 summit meeting in Toyako, Japan, next month may have to go into crisis management mode if the situation continues to deteriorate, they added.
The urgency of dealing with surging oil and food prices was not lost on...

http://www.businesstimes.com.sg/sub/news/story/0,4574,283685,00.html?