The second wave of inflation

Currently we are seeing a world wide explosion of food price. Inflation hits the poor first. It makes these people furious. The price of food is increasing in 2011 faster than in 2008. We have already reached in a short time of 5 months 80% of peak of the wheat price index of 2008.

On the other hand the tolerance against higher inflation rates is decreasing in poor countries. Will inflation cause world wide revolts? Yes, it can. If the inflation increases more, in the middle class will grow anxious. If we are in a range of 2 to 5 percent the middle class is less affected. But over 5% the stock market will get into difficulties and hit the middle class. In Indonesia the current general inflation rate is 7% and the food inflation rate 16%. The stock exchanges lost about 11% in December. So the share market is not a safe haven in the case of increasing inflation. Only the rice price is not too high. A high rice price is a nightmare of Chinas party leaders and will do all, that the rice price cannot increase. But what will happen, if the rice price gets higher? Will it then give revolts in China? I think it absolutely will.