Catalyst for Inflation.

Ben Bernanke's speech the other day at Bank of France, revealed his fears of inflation being exportedd all over by countries that artificialy keep their currencies low, instead of allowing the currency value being dictated by market forces. The idea being material imported for conversiion and export will rise in value which will reflect in the export value which will catalyse inflation all over where these products are exported. The rise in value of converted goods will pilfer into rise in value of other goods localy creating inflationory preasures localy too.

The other point noticed in his speech was, he expected countries with trade gap to adjust the policies with budget gaps both working in the same direction. Trade deficit with budget deficit and trade surplus with budget surplus or reduction in deficit using policies. This makes the American economy to be in theoreticaly perfect rhythm as of now  or so it seems.

Consumption of essential commodities may increase at the rate of approimately growth in population. Production of essential commodities over a period of time will have constant growth depending on agro-climatic condition , more production durig some years and less production in some years. However there is a positive growth in production of essential commodities due more area being irigatd and also use of scientific methods in agriculture. There is enough stock of agricultural produce to meet the demand at any given point of time. Manupulating release of stocks create artificial scarcity which increases demand and there is price rise. Similarly service charges of certain skilled services though there is enough supply having realised that provide less quantity of service and create artifical demand so that services provided can be charged more. (only about 20% of international transactions are due to import and export and the rest of the transaction is due to exchange rate variations which provide income for the bankers and other middle men).

As could be observed from various statistical analysis that depite existence of adequate stock of various food articles it could not reach the consumers due to inadequate infrastructure and lack of smooth supply chain delivery system and hurdles.

Hoarding and black marketing of essential commodities are according to me the two main reasons. Because of this an artificial demand supply gap is created which results in increased costs and hence inflation.