David Lentz

Will the World's Central Banks Successfully Fight Inflation?

I think that there are only two paths here -- either the CB's fight to delay/mitigate inflation until effective alternatives to sky-high oil arrives, or we see the gradual collapse of western civilization, as all of its wealth (assets) are sucked away into the hands of the oil-producers.

Maybe a few will have clueless leaders (Zimbabwe, ... ?) who will churn the monetary printing presses and embrace hyperinflation (and inevitable collapse), but the vast majority will either dither and wither or raise rates to the brink of crushing their local economies (and we are a LONG way away from that) in hopes of slowing demand.

In either case, we ARE going to see price inflation, regardless of whether the CBs cave in to political pressure to stoke inflation to "mitigate" the price inflation with monetary inflation (a bad idea).

In the end, alternative energy solutions that make oil (and possibly coal) obsolete will arrive, in the forms of new ways to generate power, and better ways to conserve it. We have not even scratched the surface of what is possible in either area.

Worst case? Famines+wars bring on the Malthusian result, lowering the population to levels that the global economy can support.