ARTICLE: "An old enemy rears its head: Emerging economies risk repeating the same mistakes that the developed world made in the inflationary 1970s," The Economist, 24 May 2008, p. 91.

Scary bit of reporting by the Economist: the rising New Core economies look to be triggering their own inflation much like the West did to itself in the 1970s.

If measured correctly, five of the ten biggest emerging economies could have inflation rates of 10% or more by mid-summer. Two-thirds of the world's population may be struggling with double-digit inflation.

No surprise on drivers: oil and food.

Naturally, emerging markets are loathe to raise interest rates, the usual fix. But the synchronized boom of today, just like that of the early 1970s, has caused commodity prices to surge across the planet, and "governments have responded with subsidies and wage and price controls," adding to money supply growth.

Logic in the West says the Great Inflation of the 1970s cannot be repeated because central banks in the West are now more independent from politicians. But when we add in all these state-directed market states, the old mix is back, especially when emerging markets don't want to trigger capital flight and/or job loss.

The Old Core says to the New Core: let your currencies float more and all will be solved. True in the global sense but less so in the local sense, and therein lies the rub.

But it rubs both ways, because the more emerging markets resist, the worse global inflation and local inflation becomes, and they're the economies that will suffer the most, according to most economists.