In Venezuela they just adopted a new currency to help stop inflation. It will just increase it. My guess is that Argentina's inflation will soon be quite high. This contagion may spread throughout Latin America helped by China. China does not have the sophisticated mechanisms to help keep their rising inflation in check so they will not be able to control it and will begin to export it.

So what? Why should Americans care? In the 2001 recession the US Federal Reserve could drop interest rates because of low inflation and strong dollar. Now the situation will be reversed. According to the minutes of the Fed released today, they said that they might be willing to lower interest rates. The problem is that if there is world wide inflation and a weak dollar, they might not be able to do so. Not good.

My predictions were just confirmed by Alan Greenspan:

Mr. Greenspan, who retired last year, said in a recent interview that inflation risks are much greater today than in 2001 and thus his successor, Ben Bernanke, has less freedom to shore up the economy with steep rate cuts than he did. "This is a much tougher monetary-policy environment than anything I experienced," he said.