Rising Commodity Prices

LSW was not aware that world commodity (oil, copper, cotton, wheat and corn etc.) prices have risen substantially in the last 6 months until Paul Krugman’s article in the New York Times came out on December 26, 2010.

Interesting reading and controversial judging by the comments against it and him which a search reveals.

LSW’s somewhat kneejerk reaction to this bit of news (oil up to ninety dollars a barrel, copper and cotton prices have hit record highs, wheat and corn prices rising) would have been attribute this to speculation. Krugman says it is more a result of rising demand from emerging economies coupled with a limited supply of said commodities.

Right-wing folks think rising commodity prices signal inflation and are a result of the Fed’s olicy of ‘printing money’. Krugman says that

“they’re suffering from delusions of U.S. economic grandeur. For commodity prices are set globally, and what America does just isn’t that important a factor.”

He does not dismiss speculation as a contributing factor

“But the fact that world economic recovery has also brought a recovery in commodity prices strongly suggests that recent price fluctuations mainly reflect fundamental factors.”

and for the people who love mysteries in the middle of their economic news he mentions the mystery investor who has bought up much of the world’s copper supply.

Emerging economies are the cause of rising commodity prices as well as severe weather events (climate change) which for example pushed up the price of food in some regions. Krugman’s conclusion that this is a sign of things to come and is evidence that we will have to change the way we live to reflect the reality of more expensive resources.

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