Contributing to their slumping confidence in April, consumers expected that inflation would accelerate to a pace last seen in the early 1980s. The news cemented the prevailing view that the Federal Reserve, which is to open a two-day policy meeting later on Tuesday, would signal an end to its aggressive campaign of lowering interest rates.” (Via Reuters)

The fact that consumer confidence is at a 5 year low is not that alarming as it has been roughly six years since the last US downturn.

What is very interesting is that consumers are already thinking about high inflation similar to that of the 1980s. There hasn’t been any hard economic evidence that inflation is going to get out of control, although there are some warning signs that it *could* eventually happen in this cycle.

One thing is for certain, if consumers perceive inflation and are not confident, the stimulus cheques mailed out to millions of Americans will end up in bank accounts instead of the economy. Hindsight is beginning to make that decision look very irrelevant indeed.

The chart on the left shows that rice prices are up. WAY WAY WAY UP. That’s more than 3X the price per tonne in the past few months.

Rice is the food staple of the world. More people eat rice than anything else. So when the price moves in such a material fashion, we should definitely be taking notice.

Rice, like oil, is used as an input for many goods (and we’re not just talking about Rice Krispies). With such a dramatic move, it won’t take long before prices for many products begin to move higher in tandem.

Crude oil prices are hovering close to $120/bbl, at record highs. With the low interest rates currently being pursued in North America, it is no longer a question of if we’ll see inflation, but how soon.

If we do begin to see inflation before the economy recovers, expect to hear a whole lot about Stagflation.

Here’s the good news: It looks like a bubble.  Not a quick shock like in the 70s, but a bubble. A bubble just like Tech in the 90s. A bubble just like Real Estate from the past few years. Bubbles can last for years, but eventually will pop and bring relief to an inflated market. The only concern is how long will we have to suffer, and at what cost?