Inflation around the world is heating up and central banks are having a tough time trying to deal!

From a Bloomberg.com article today on consumer inflation (note those are Zimbabwe dollars below):

“We're seeing a marked increase in inflation pressure everywhere,'' says Harvard University professor Kenneth Rogoff, who was formerly chief economist at the International Monetary Fund. Rogoff says the threat may be the greatest since the 1980s.

Driven by rising demand for food, fuel and commodities, especially in China, India and Russia, inflation is accelerating in every corner of the world. Merrill Lynch & Co. predicts a 4.2 percent global rate this year, the highest since 5.2 percent in 1999 and almost a percentage point more than it forecast at the start of 2008.

Good Times Behind Us

Zimbabwe holds the inflation record. Its rate soared to 164,900 percent in February as shortages of wheat and other goods pushed the cost of a loaf of bread to $667. In Singapore, consumer prices are climbing at their quickest pace in 26 years; in the euro zone, they're the highest since 1992. ``The good times are behind us,'' Bank of France Governor Christian Noyer said at a March 7 central banking conference.

For central banks, the inflation outbreak presents a dilemma as they strive to jump-start slowing economies.

....

Governments are battling to curb unrest by keeping prices under control. Malaysia is spending almost 800 million ringgit ($251 million) subsidizing cooking oil. Indonesia may pay 22 percent more for fuel subsidies this year than the 106.8 trillion rupiah ($11.6 billion) forecast in January.

Wrong Strategy?

Such initiatives may backfire. Artificial price curbs only fan demand and ultimately make it tougher to contain inflation, Group of Seven finance ministers said in February.

The criticism is easy for G-7 Finance Ministers as they do not need to answer to the consumers who are ... VERY UPSET!!  We in the "West" find it so easy to criticize and think the "FREE MARKET" is the only way!  I have found that if you lose power, then your free market initiatives go nowhere anyway!  Being ideological about it all doesn't get anyone anywhere either. 

As the Chinese have learned, one must be practical as well as try to follow the free market.  That doesn't mean the Chinese have the answers, by any means, however they are definitely trying to open up their markets!  Remember that just 30 years ago the country was still TOTALLY closed with the "Gang of Four" - post Mao Zedong, Communist ideologs leading the country.  The 12th Party Plenum of December 1978 was the turning point!

Again  from the article: