Commodity price rises are not the result of US monetary policy, writes Paul Krugman. "IS IT speculation run amok? Is it the result of excessive money creation, a harbinger of runaway inflation? No and no. What the commodity markets are telling us is that we're living in a finite world, in which the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices. And America is just a bystander in this story." http://www.watoday.com.au/business/...global-economy-presses-on-20101227-198i6.html I'm not sure what to make of this one. His reasons for rising commodity prices, based on increased demand from developing economies, appears valid but to dismiss US monetary policy as having no impact is a very big call. I certainly agree with the finite world theory and have long pondered the implications of unlimited demand for limited resources. IMO it just cant end well, there will be a breaking point. What exactly that will entail remains to be seen but I don't think it will be pretty.
Its the combination of both, finite supply and unlimited printing of fiat dollars. You have to remember, one side of the equation is the supply, the other side is the measurement of its value in fiat dollars. ie. Gold vs Dollars, Silver vs Dollars, Wheat vs Dollars, Oil vs Dollars etc. How can the price just rise purely because of the supply side, when the fiat side is increasing because of QE all over the world. They are both interlocked, too much money causes the price to increase. Too little supply causes the price to increase. The combination of both, makes it increase faster. Slam
I remember reading somewhere that China is an ancient country that has worn out its resource base. The soil is worn out after thousands of years. It used to export iron ore,now it imports it. Etc. China has plenty of Usd ,that are falling in value ,and it needs the resources. Japanese expansion in the world war two was based on the need for resources,either that or become a poor country again. America was oil rich and some say oil made America rich.Now it imports oil. The securing of natural resources can get ugly.
The reason why America imports oil, is because they are getting it for "free" - they keep writing cheques that cannot be cashed. If oil, were to be traded in Euros or gold or anything else other than the USD, than USA would use some of its OWN oil to meet demands.
Yes. most stuff that America "buys" such as oil is free for them. They pay for it in US dollars, which they simply "print" as they need more - they don't need to earn the funds, they simply change a cell on a spreadsheet. Now with QE they are going beyond that to the point where that are pretty much counterfeiting their own money.
I also remember reading somewhere a while back that America will keep buying oil until it can not no more and then turn onto its own reserves. They have plenty and sitting on it until the time comes when the price is so high America will be able to make a fine profit from it. They are just waiting for the ball to come back into their court. With China, the farming was done a way so that they could keep the same amount of produce coming off the land. That has all but disappeared due to Western style farming which has gotten into Chinas farm land like a cancer. You will see China buying alot of food in coming decades and its not just because of there people wanting to eat like Westerners.
