Gold and silver make new highs on jobs report

Such was not the case in Europe and Asia, however. Eurozone inflation spiked higher than had been anticipated last month, to 2.7% year-on-year. The ECB has already attempted to jump ahead of that curve with its first interest rate hike since 2008. A further similar move is now expected for July. Over in China, the story remains very much the same as it has been for some time now; high growth, high inflation, and bubbles in everything from suburban tract homes to cemetery plots. Meanwhile, the third largest economy in Asia – India – experienced an 8.98 percent rate of inflation in March. Its central bank has raised interest rates more than half a dozen times over the past year.

The Chinese economy – as reported this very morning – has turned in a growth rate of 9.7% in Q1 and its CPI has risen by 5.4% in one year. The surprises in these numbers were both to the upside and place the onus on Premier Wen’s government to try to do something about them. While China is visibly upset with the Fed for ‘exporting’ inflation via its ultra-loose monetary policy, there is no arguing the fact that it too has had a $4 trillion stimulus package “on offer” since early 2009 when the global financial crisis was in full bloom and its leaders tried to keep growth from stalling out and creating social problems.

Now, the problem appears to be one of an opposite nature. China’s recent credit and asset bubbles pose a direct threat to its economic growth – good as it might be showing to be today – and the spiraling costs of food (fruit prices up 31% in one year for example) and fuel (gasoline at $4.50 today) risk the sparking of social upheaval. This is a difficult task for the Chinese government and one that might require a tad more than mere interest rate and bank reserve requirement upward adjustments.

Finance ministers and central bankers come together in DC later today as the semi-annual tete-a-tete of the IMF and of the World Bank gets underway. Participants will be tackling the problem being posed by soaring energy prices, the Japanese quake’s after-effects, and the on-going PIIGS issued in Europe. While nobody at the meeting is expected to declare the global economic recovery as having suffered any fatal blows as a result of any of the above impact factors, the characterization that is likely to stick as the meeting unfolds reads rather…poetic; “While occasional shocks are rocking the markets, the recovery keeps on rolling.”

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