Money Money Money

Is inflation the next threat? One guy you might have heard of before is feeling the pinch:

Warren Buffett, the world’s second wealthiest man, said some businesses in his Berkshire Hathaway Inc. group were starting to feel the pinch of inflation.

Skyrocketing steel prices have hurt Berkshire’s MiTek unit, which makes steel connectors for roofs, Buffett told reporters on Sunday.

MiTek has increased its prices, but those moves haven’t kept up with the metal’s rising cost, he said.

“Once the ball gets rolling, it’s hard to stop,” Buffett said of the inflation threat, a day after Berkshire Hathaway’s annual shareholders meeting and earnings report. “Once prices start increasing, it’s contagious.”

Carpetmaker Shaw Industries and brick producer Acme Building Brands were also being affected by higher oil and natural gas prices, Buffett said. Zinc and lumber prices have also risen.

Now, is this rise in commodities prices due to overly-low interest rates, artificially raising demand? Or, are we simply seeing a global increase in demand (think of China and India’s two-plus billion increasingly-wealthy consumers), which supply has yet to catch up with?

We don’t know. In fact, we could be seeing a combination of both. In either case, the effects so far seem to be mild.

If increased demand is the problem, then there really isn’t much of a problem. New factories, mines, lumber yard, what have you, will be opened, or ones which were previously shuttered for being unprofitable will be re-opened. That’s how supply and demand work. Oh — and lots and lots of unemployed people, here and abroad, would get jobs.

If the problem is monetary, that’s trickier. If the Fed has kept rates too low, too long, then they might have to raise them quickly and uncomfortably. Resulting, of course, in lower growth, or perhaps even a recession. Some people currently holding jobs would lose them.

So which is it? Hell if I know.