Stagflation risk in the horizon?

The economist define 'stagflation' as a situation when there is high inflation coupled with stagnant economy or recession.

Is our current world econmy seems to be on the verge of experiencing that? Has the rising oil and food prices caused a cost pushed inflation?

Is our current world economic situation similar the 'oil shock' in the 70's?

I am not really really in the position to predict, but below are some of my views. I have divided my views based on the Growth Factors and Recession Factors. Although the list is not meant to be conclusive, I have listed them out, so that we all can start thinking about it.

Growth Factors
- Chinese econmic policies are like 'piggy bank policy'. Money can go in but very difficult to come out. The good point is that China has lots of liquidity, the bad point now is , it has high inflation, properties and stock market has gone up so much in too short a time. But I am of the opinion that, Chinan will be able to weather the world econmic slow donw, because it has so much more to develop. With the liquity sloshing around in the economy, it will be able to use it invest and develop the west and autonomous region; and nurture an enormous up and coming domestic market.

- India has so much to offer. In fact I believe India is involved in areas so much more sophisticate than China, such as software engineering, human resource outsourcing activities. There just so many overseas Indians are also a huge contributor the success of India's economy.

- The rise of the middle class, if only 10% of India and China population have rised to the rank of middle class, this will translate into more than 300million. A figure equivalent to the population of USA. See the demand ? it also means that the current rise in prices has a lot got to do with demand and not 'sudden scarcity'.

- The world is so much more inter connected now than ever. The rise in oil profits of the oil producing countries, has also increased their overseas investments and demand for goods. Dubai and Doha are examples where oil money has been spent and benefiting the world by providing employment and demand for raw materials. It is now very unlike in the 70's where there was a sudden decline in supply mainly due to the overthrowing of the Shah of Iran.



Recession Factor
- Actually I am more concern about our country. Yes our prices are rising, but is there increase in FDI especially people from oil rich country? Yes they have a lot of money and are interested to invest here; I think the problem is they can't find good investment here....

- Out poitical climate is a bit uncertain. I would term it as growing pain. A sign that our country is coming of age, in terms of political maturity. It is a necessary process. Lets hope it will be quick. Investors don't like to have their agreement relooked each time there is a change in government.

hmm...that's about it for this time....