Like a wind-driven brush fire, inflation is picking up speed throughout the industrial world -- from the United States to Japan. Prices at the wholesale level are shooting up at a 20 percent or higher an nual rate in Japan, Britain, and Italy, among other industrial powers, as well as in the US.
Taking Western Europe as a whole, reports the Organization for Economic Cooperation and Development (OECD), consumer prices rocketed up at a 14.3 percent pace in the six months ending January 1980.
Leading Western nations are scrambling to tighten credit, shrink the growth of their money supplies, and reduce government spending.
World recession, or at least a marked slowdown, may be the result, as top industrial powers -- including the US -- deliberately put the brakes on heated economies.
A byproduct is a kind of international interest-rate war, as central banks jack up rates to keep capital at home and to bolster the value of their national currencies.
Currently the US dollar is a winner, with investors around the world cashing in other moneys in favor of the dollar and its potential high rates of return.
This boosts the value of the dollar in relation to other major world currencies, including the Japanese yen, West German mark, and Swiss franc .
Japan and the United States offer dramatic examples of the dizzying economic changes now sweeping the world, as oil and other commodity prices buffet industtrial states.
From a surplus of $16.5 billion in 1978, the mighty Japanese economy plum" meted to an $8.6 billion deficit in its current account balance last year.
This measure of a nation's balance of payments includes merchandise trade (the export and import of goods) and the flow of services, including shipping, insurance, tourism, and interest earned on investments abroad.
Sparking the massive Japanese turnaround was a drop in the Japanese trade balance from a record $24.6 billion surplus in 1978 to a mere $2 billion surplus in 1979.
Japan, which imports all its petroleum, was badly hurt by last year's doubling of the price of oil. In the past, the Japanese relied on a healthy trade surplus to overcome their traditional deficit in service transactions.
The US, by contrast, jumped from a $13.5 billion current account deficit in 1978 to near balance last year -- only a $317 million shortfall.
This improvement took place, despite a $24.7 billion US trade deficit last year, reflecting the higher cost of imported oil.
Unlike Japan, the United States traditionally earns a large surplus in service transactions, and last year this surplus grew substantially, partly because American oil companies earned huge amounts on overseas investments.
Simply put, almost as much money flowed into the United States in 1979 as flowed out, despite a very large deficit in merchandise trade.
This year, the US current account performance may slip, experts say, for a variety of reasons:
* Foreign oil will cost americans at least $20 billion more than it did last year. This may cause the US trade deficit to climb in 1980.
* Because world economies are slowing down, other nations may not buy as many American exports as they did in 1979.
Analysts put soaring oil costs at the top of the list of inflationary factors for many industrial nations.
Great Britain is a special case. Almost self-sufficient in oil, Britain pays no huge bill to Organization of Petroleum Exporting Countries, the 13-nation oil-exporting cartel.
But the government of Prime Minister Margaret Thatcher has sharply increased the value-added tax, which directly boosts the cost of a wide range of consumer goods and, hence, Britain's consumer price index.