Rising food prices, weak dollar hit poor

Against the backdrop of the gloomiest outlook for the global economy in many years, the price of oil was closer to $120 a barrel for the first time last week and the cost of wheat, rice and soya beans soared.

The first rule of economics - that prices are determined by demand and supply - appears to have broken down. When times are tough, commodity prices normally fall, but as the financial crisis has deepened over the past nine months they have been going up and up.

There are several explanations for this strange phenomenon. One is that markets are indeed still reflecting demand and supply, since the short-term effects of a looming recession are being outweighed by longer-term threats to supply.