There is rapid inflation in the system, dear reader, but let’s not speak too loudly about it. I’ll keep this note to a whisper as we turn our attention to the just-released Institute of Supply Management’s factor index. The institute’s survey of manufacturers throughout the U.S. includes a discussion on commodity prices. Commodity prices are a critical component of manufacturers’ costs, because they are the inputs used to produce all of the goods that consumers purchase in this country. For February of this year, commodity prices increased six percent from January’s level! What is critical to note is that this rate is accelerating and manufacturers are growing concerned about the vigorous increase in commodity prices. At the same time that the U.S. released its manufacturing data, Europe did the same. Manufacturing in Europe continues to contract, but one of the most important components of the survey showed that commodity prices—from oil to plastics to steel—had the sharpest rise since June 2011. Worse, the acceleration—rapid inflation—in commodity prices is occurring at the fastest rate in the survey’s history! It was not one or two of the countries in Europe that was responsible for this record rise. The survey highlighted the fact that the rapid inflation rise in commodity prices was found in all of the 17 members of the eurozone. This note of concern from the survey in Europe was confirmed by the Producer-Price Inflation European Index, which increased 0.7% in January. The annual rate of increase for this index is accelerating. England just released its measure for January’s producer prices. Commodity prices increased in January at the fastest pace in nine months with all costs for manufacturers—dominated by commodity prices—rising seven percent year-over-year in January, from January 2010. India also reported its Purchase Manager’s Index for January, which had a healthy gain as well. However, the cost of finished products—where commodity prices are a large component—increased at the fastest pace in almost a year. Around the world, signs of commodity price rapid inflation are evident. What is more troubling is that, recently, the pace of rapid inflation has been accelerating. Central banks want to keep interest rates low, but it will be interesting to see how that can be accomplished if rapid inflation continues. If rapid inflation persists, then that will put pressure on interest rates, which in turn will put pressure on the stock markets around the world, especially here in the U.S. There is a very dangerous mix brewing: world economic growth is slowing, inflation is rising, and interest rates are at record lows. Reduced interest rates are needed to spur economic growth. But an extended period of reduced interest rates and money printing …