Throughout the world consumers and investors are taking a beating, says Bill Bonner.

In some countries soaring inflation is eroding consumer purchasing power. In others tumbling asset prices are destroying investor wealth. In most both are happening at once.

It’s a major headache for central banks. Bill says the Fed should follow the ECB in hiking rates, even if it means an economic slump…

Editor’s Note: There is nothing the US Treasury can do to prevent further losses for the dollar, says Peter D. Schiff, not when the Fed’s policy on inflation is firmly guided by fantasy.

European stocks were gutted yesterday (Thursday) as banks took heavy losses in the face of more hawkish inflation comments from European Central Bank (ECB) President Jean-Claude Trichet that put pressure on already struggling financials.

The Dow Jones Stoxx 600 closed down 2.6% to 288.48, the worst finish for the Eurozone index since October 2005.

The FTSEurofirst 300 had a 2.5% drop, to close at 1,197.02 points, its largest one-day percentage drop since mid-March, Reuters reported.

A “new wave” of the credit crisis is now battering banks and lenders that steered clear of toxic subprime-related loans, says The Washington Post.

Late payments on home-equity loans are at a record high, and delinquency rates on loans for cars, small businesses and construction are at levels not seen in a decade or more — all bad news for lenders, regardless of their subprime exposure.

Of course, the bad news isn’t limited to the financial sector. Mike Burnick in the Offshore A-Letter warns of that a triple whammy of deflation, inflation, stagflation is also threatening the global economy…

Eurozone inflation measured 3.7% year-on-year in May, the highest rate for 16 years, reports Bloomberg. This increases the likelihood of an interest rate hike by the ECB in July, putting more downward pressure on the US dollar.

Money Morning’s William Patalon III discusses how rising inflation is dominating the news on both sides of the Atlantic:

Undoubtedly, a universal theme is emerging at the Fed and other world central banks: Inflation, Inflation, Inflation.

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