The latest something is a drought in the US that threatens to make this year's grain harvest the worst for 30 years. Given what happened in 2008 when food prices temporarily got out of control - riots in the Far East; an export embargo on grain from Russia - it's no wonder that financial markets are nervous.
The pity is that this has happened when the outlook for inflation in the UK is the best it has been for some time. True, June's figure for the annual change in the Consumer Price Index - the Bank's favoured inflation measure - was a surprise; it came in at 2.4 per cent, a steep drop from May's 2.8 per cent. That's still above the Bank's 2.0 per cent target, but it was a continuation of an encouraging trend - for eight of the past nine months the annual inflation rate has been lower than the month before.
That could soon change because higher prices for basic food stuffs quickly feed through to retail-price inflation. And it leaves investors stuck in the odd position where, simultaneously, they have to cope with the effects of stubbornly high inflation and central-bank monetary policy that is designed to drive inflation upwards.
That scenario should be about as miserable as it gets for assets whose value depends on supplying a fixed stream of income (ie, bonds); not that you'd notice from the yields on government debt issued by the UK, the US and Germany. But is it all bad? After all, inflation will erode the real value of debt, which is a prerequisite for getting the world's developed economies out of the hole they are in - and that should be good for equities.
However, the worry is that the wrong sort of inflation is about to be nudged. What the Bank of England wants is inflation that's a response to its stimulative monetary policy; the sort that is caused when an economy stirs itself back to life and demand revives more quickly than supply. That sort of inflation helps create a virtuous circle where demand prompts supply, prompts extra employment, prompts demand and so on. What it looks like getting is more of what's been on offer for some years now - inflation driven by higher input costs, which is, in effect, an additional burden on domestic activity. Though let's take the positives - whatever category of inflation we get, it will indeed erode the real burden of that debt.
One lesson to be learned from this concerns the weakness of central banks in the face of powerful economic forces. Time and events have shown that so-called inflation targeting, which has been the chief plank of central-bank policies since the early 1990s, is as ineffective as specifically targeting the growth in monetary aggregates, which was the big plan for a dozen or so years before that.
By the mid 2000s central bankers were busy congratulating themselves on the efficacious effects of inflation targeting as inflation remained quiescent. But their success was illusory. Inflation was docile more because of changes to the supply side of the global economy, which we can caricature as the 'China effect', than anything to do with monetary policy. Now central bankers aren't actually doing any worse than they did in, say, 1992-2005, it's just that the global forces are conspiring against them rather than with them - thus their weaknesses are exposed.
However, weak does not mean impotent. Sure, Milton Friedman's famous dictum that "inflation is always and everywhere a monetary phenomenon" does not have quite the same intellectual force behind it as it did some years ago. At least, in the relationship between inflation and growth in the money supply, economists nowadays are much less sure about which is cause and which is effect.
That said, what remains intuitively obvious - and intellectually plausible - is that, say, the Bank of England pumps enough money into an economy for long enough, then it will affect the price level more than it influences output and employment. That means that deflation - often the worst outcome (though that, too, depends on which type of deflation) - will be avoided. But it also means that current rates of inflation will be maintained or the rate may accelerate. In other words, somewhere along the line Irving Fisher's famous equation about the equivalence of the supply of money plus its velocity of circulation and nominal output (MV = PQ) will hold good.
In effect, this means that the great bull market in bonds will peter out. Yields on 10-year government bonds of 1.5 per cent will be seen to be what they are - a great way for investors to lose money in real terms.
The miserable thing is that persistent inflation of the wrong sort won't be that great for equities. Sure, companies with pricing power will do best, but that's because they tend to be the best ones anyway. As for thoughts that the demise of the great bull market in bonds will somehow morph into the next great bull market for equities - dream on. This is - and will remain for the foreseeable future - a stock-pickers' market.
