Saturday, Jul 07, 2007
Oil isn't the only inflating commodity
Telegraph: As 'China effect' reverses, inflation threatens
Lead prices have jumped to $2,900 a tonne (£1,440), up 160pc since last summer. Corn prices are up 60pc in a year and are now flirting with $4 a bushel. Soybean prices up 50pc since October. Higher grain prices are inflating animal feed.
"There is now a whiff of the late-1960s in the air as benign boom turns to a faintly menacing, late-cycle, nexus of excesses. Rampant global liquidity has driven up asset prices. This inevitably spills over into ordinary inflation, albeit with a time-lag." Higher interest rates should precede a structural rise in ordinary inflation by approx two years to contain it. Should we be at 8% IR's already with 1% CPI to future proof the economy?
Posted by planning4acrash @ 01:04 AM (132 views) Add Comment
7 Comments
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1. planning4acrash said...
The Times: Criminal steeple chase as lead price goes through roof: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2039825.ece
2. paul said...
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2039825.ece
3. Surfgatinho said...
Funny, I and plenty of other members on here have seen this coming for a long time. Why does it seem to be a bit of a suprise to those who make our economic policy.
Also it is nice to see we have thoroughly squandered this era of low inflation and blown everything on throw away tat
4. talking rot said...
An article I enjoyed reading - although I can not agree with it in entirety. It seems a bit over-the-top although I think the fundamentals of the "low inflationary period" are changing.
I think the BoE MPC will enter its "wait-and-see" phase now. No more interest rate changes this year. Possible cuts in early 2008. Election in 2010.
5. planning4acrash said...
There are hints here at an alternative approach by Brown, TR. The article includes a bit about how Brown has been making speaches about how we must deal with inflation now. It is my opinion that he has not allowed interest rates to rise until the China effect is obvious. Earlier interest rate rises could well have been blamed on internal factors, but now the cat is out of the bag on a global scale. He is likely to blame foriegners for the mess. He will claim that China has upset his perfect economy and that we must don our tin hats to fight off the threat. This will appeal to reactionary swing voters, particularly if it is supported by tabloids.
The simple matter is, if this can be pinned on the global economy, then Brown can argue that switching to a Tory Government will have no impact on the global factors. He may indeed use it to his advantage and say that, by tackling it head on, he is the one to deal with this "global" economic crisis. Many leaders use hardship to embolden their regimes. Mugabe, Hitler to name a few! Expect further emphasis on dealing with the global economy, i.e. more tax reform, more investment in education, etc. more involvement in Europe. All of this as a PR spin around an environment of rising interest rates and inflation. I personally think that he'll pull it off and that the Tories won't get close to government for at least another two parliaments. They are simply too fragmented, relative to Labour, at present.
All that Brown has to ensure is, that the worst of a house price crash is over and that positivity creeps back on the way towards the Olympics and a 2010 election. If I was him i'd be bringing forward to crash to this Christmas time, in time for a plateau and recovery towards the middle of or the latter part of 2009.
6. Kaitain said...
Looks like Jim Rogers was spot-on when he wrote "Hot Commodities" a few years back. Wish I'd had more nous about investing in the commodities markets at the time.
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