How High Oil Prices Will Permanently Cap Economic Growth - Bloomberg: A double whammy of rising oil and food prices means inflation will be here sooner than anyone would like to think.
Rising inflation rates in China and India are a clear signal that those economies are growing at an unsustainable pace. China has made GDP growth of more than 8 percent a priority but needs to recalibrate its thinking to recognize the damping effects of high oil prices. Growth might not stall entirely, but clocking double-digit gains is no longer feasible, at least without triggering a calamitous increase in inflation. If China and India, the new engines of global economic growth, are forced to adopt anti-inflationary monetary policies, the ripple effects for resource-based economies such as Canada, Australia and Brazil will be felt in a hurry.
Triple-digit oil prices will end the lofty economic hopes of India and China, which are looking to achieve the same sort of sustained growth that North America and Europe enjoyed in the postwar era. There is an unavoidable obstacle that puts such ambitions out of reach: Today’s oil isn’t flowing from the same places it did yesterday. More importantly, it’s not flowing at the same cost.