WHAT I DID ON MY SUMMER VACATION: After long quiescence, inflation is making a comeback. Obviously, high oil prices are a big part of this. But there’s another part of the story: the entrance of China (and to a lesser extent India) into the global labour market has effectively held down prices in developed countries, even when those economies are running at full capacity. Economic bottlenecks and problems with the financial system in China are making it harder for China to effectively export deflation (deflation is the opposition of inflation), which means consumer prices may rise still further.

That, in turn, is forcing central banks to raise interest rates even when the economy isn’t that strong. Both the European Central Bank and the Bank of England did so today, and while the former was all-but-foreordained, the latter move was a big surprise to everyone. If you have a subscription to The Economist (and if you don’t, what are you waiting for?! We’re giving away four free trial issues right now), you can read about it here; that’s what I’ve been labouring on under the sweltering August sun*.

Why should I care? I hear you cry. Why, because in these days of global markets, we’re all as interconnected as characters in an MCI ad; when the European Central Bank sneezes, your stock portfolio catches cold. Plus, if we want to be able to take a break from buying all the tea, (and televisions, and turkey basters, and tricycles) in China, we need Europe to get off le divan and get some gosh-darn economic growth. Which is harder to do when the interest rate on Das MasterCard just went up another two points.

*Well, technically I am under it–it’s just that there’s a roof and some air conditioning between us.