I'm not an economist so maybe I should keep my mouth shut, but...
The subject of rising prices has already been done to death in the media recently, but I do think that too little has been said on the underlying effect of the rise of India and China on our relative wealth. Common opinion seems to be that this is a short term recession that will fix itself soon with the right amount of government stimulation. I don't think so. I think it is a much bigger and longer term trend.
For many years (even before I came on the futures scene), futurists were speculating about the fact that there are only so many resources in the world and as other countries develop, so the developed countries would have to decrease their consumption. But common opinion resisted this and insisted that rich countries would stay rich and that other countries would just have to live with what was left.
I think we are now finally seeing the consequences of the irresistible pressure of the market, which will re-level the global playing field. Developed countries will find their populations having to take a drop in standard of living as people elsewhere become relatively richer.
Of course, we are not yet in the business of reducing salaries, and I don't think that is likely to happen any time soon. The market doesn't need that to rebalance things. All it needs, and we are seeing this happen abundantly now, is for prices to change. As people in other countries get richer, so demand rises and the market ensures that global prices rise. This already conspicuously applies to oil and grain and will affect other commodities in due course too.
As these basics become more expensive, the cost of everything else increases. So even though our wages stay the same, our spending power decreases sharply. Falling exchange rates (just another way of rebalancing prices according to relative national efficiency, power and influence) makes imports of commodities still more expensive.
People will not stop developing and getting richer. That will continue. Demand for resources will increase and prices will rise further. Of course this slows the rise of buying power for the newly rich too, but a free market ensures that resources go to people according to their ability to pay, and if they are willing to pay more, you will have to as well if you still want that resource.
Of course, it is not a free market. There are political influences, and powerful countries can and do strike deals with resource providers to ensure preferential treatment. This reduces the resources left to the rest of the world and consequently amplifies the interaction of price with demand.
The losers as always are the billions on low incomes. As rich people can afford to feed grain to livestock to make meat, there is less left for the poor for whom it is their only food supply, and the increased prices make it impossible for them to feed their families. Compound that with increasing pressure from the stupidity of using limited agricultural land to grow fuel for rich people's cars, and we create food riots.
So, where will it go? The world is getting richer. Improving technology means that we can take more resources from the environment and add more value to them with the same human effort. We can educate more people to a higher standard and create more wealth generating potential. So however the wealth is distributed around the world, we will simply have more people with money than we had before. Demand on basic resources will increase steadily for several decades to come. Commodity rices will rise and rise as more and more people can afford to pay.
Away from basics like oil and grain, it is far more complicated. Technology will also increase automation, and the resulting derivative products will become relatively cheaper. So although the price of raw materials may increase, it will cost less and less to turn them into final products such as TVs or cars. Automation will affect resource extraction too. Costs of production will decrease while there is abundant resource available, since robots can make robots to make robots to make mining equipment and staff mines and deliver, refine and process the extracts. Of course, as we use up reserves that are easily accessible, the costs of extracting will eventually increase again, as we are seeing with oil now. But new technologies can often create substitutes. Copper hasn't run out mainly because we don't need so much of it now for plumbing or communications, as fibre and plastics have substituted.
Automation reduces the need for human involvement and forces people to find alternative work too. This is another way of reducing people's wages of course, albeit indirect.
The only real hope in all of this is that we can somehow make the same resources go round efficiently enough to satisfy everyone's needs. This might just be possible with advancing technology. Nanotechnology will create wonderful new materials that are stronger and lighter and use less basic resources. With enough high-tech and automation, they might even cost less. Improving recycling and mining of landfills will enable easier recirculation of resources. Miniaturisation of IT will allow today's large devices to be replaced by electronic jewellery. Even large screen displays can ultimately be replaced by active contact lenses. If we can create enough cheap energy, for example by using enormous solar farms in the world's deserts, then agricultural techniques such as multi-layer farms might become feasible, and together with genetic modification, precision farming, and abandonment of the rich world's self-indulgent organic farming, we may easily be able to grow enough food to supply the whole world at low prices. Even meat can theoretically be cultured in factories instead of using real animals, which are an extremely inefficient way of turning sunlight into meat.
So let's hope that technology will catch up with its potential quickly, because it is only highly advanced technology that can provide a solution that allows everyone in the world to have a reasonable standard of living. Otherwise, market forces will continue to increase prices until our standard of living in the developed world has been levelled down to meet the increasing standard of living in developing countries. This is no short-term recession. Development is here to stay and historic privileges are not sustainable.