The animal spirits appear to have full control of the market, and they're not looking to give it up anytime soon. The liquidity injection so generously provided by the Federal Reserve in the form of quantitative easing has kept a steady stream of buyers coming to the market since Chairman Ben Bernanke made his now-infamous Jackson Hole, Wyo., speech in August, announcing the sequel known as QE2.

It's hard to tell whether the massive amounts of liquidity injected into the market over the past several months are the only reason the market has run so far, so fast. However, as caution has been thrown to the wind, investors are also ignoring the inflationary rise in commodity costs that has accompanied the rise in stock prices.

Famed money manager and bubble-watcher Jeremy Grantham had more than a few words of caution in his most recent quarterly newsletter, noting that the stock market bulls "are living on borrowed time." Grantham is concerned that rampant inflation all over the world, especially in emerging markets, could suddenly pull the punch bowl away from these fearless equity bulls. While Grantham believes that high unemployment and a weak housing market will keep U.S. inflation tame for a little while longer, I believe these very factors could pinch our economy even more. If recent earnings reports are any indication, major corporations are feeling the inflation pinch, and across a variet of sectors, cash-strapped consumers will pay the price.

Apparel makers have seen its input costs increase dramatically over the last several quarters. The real driver has been the cost of cotton, which has doubled over the past year and seemingly continues to sprint to daily record highs. Popular apparel makers such as The Jones Group (NYSE: JNY), Hanesbrands (NYSE: HBI), and VF (NYSE: VFC) have all recently announced that they will use price increases as high as 10% in early 2011 to manage these inflated costs.  Shoemaker Wolverine World Wide (NYSE: WWW) announced more of the same in its earnings release Tuesday, noting that consumers would pay for the company's much higher input costs.

Consumers might be able to defer some clothing purchases, but it's much more difficult to stop eating. Food prices are rising rapidly as well, and restaurants and other food providers are certainly not going to take on these costs alone. On Monday, Olive Garden and Red Lobster operator Darden (NYSE: DRI) forecast that its beef costs would increase by 9%, and seafood by 11%. Diners at Darden restaurants can expect to see this reflected in menu increase of 2% to 3%. Fast-food giant McDonald's (NYSE: MCD) expects similar increases in its beef prices, and also hinted at upcoming prices increases to its menu.

Housing prices may be one of the only assets not experiencing inflation. However, the same cannot be said about the cost of appliances that go into building or upgrading houses. Leading appliance manufacturer Whirlpool (NYSE: WHR) saw its stock get hit Wednesday, as the rising costs of commodities such as steel, aluminum, copper, and plastics slashed its quarterly profits. It also plans to offset these costs in the coming months with more price increases. Chairman and CEO Jeff Fettig said, "Raw material inflation is driving costs higher, and we expect to mitigate these costs with improvements in cost productivity, innovation, and recently announced price increases." Expect to see those price increases much sooner than the "cost productivity" improvement.

The end?
The liquidity-fueled party has certainly been a blast for bullish investors, commodity producers, and advocates of the wealth effect. However, as the price of assets continue this relentless climb, the unintended consequences are following in lockstep. The economy has improved along with the stock market, but is the consumer ready to take on the huge wave of price increases? Eventually, something has to give. The million-dollar question: When will that be? Even Jeremy Grantham thinks this wild stock market ride can last a little longer, but he also warns investors not to be the last one standing on the tracks when the train comes through.