mish, let me try to clarify--is your position that commodities are actually deflating? to me it seems that the current environment is pretty bullish for commodities going forward--both due to demand pull from Chindia as well as poor supplies. when you pull up a monthly chart obviously it is different, because commodities were in a long bear market. keep in mind that crude only recently took out its 24yr high, so people could have said crude was doing nothing despite more than tripling (now quadrupling, maybe quintupling) off the lows of five yrs ago.
as for the rise being energy-centric, well, if you believe as i do that energy prices are going a LOT higher, and if you look at all the commodities and note that there is a lot of energy embedded in their production and delivery, then it seems higher energy if nothing else will be reflected in their prices over time. not to mention whatever other bullish arguments one might come up with.
i find it a lot easier to accept deflationary arguments that are related to lack of income growth. but as i see it, in the developed world, the problem is the lack of REAL income growth, due in part to the poor income growth coupled with rising physical goods. as expenses grow faster than income, there is inflation. the workers of the developed world are caught between the Scylla of wage competition from the developing world, and the Charybdis of demand competition for physical goods from the same places (newly enriched thanks to our job exports). and if that weren't enough, the ones in the US are in a boat called the USD which could disintegrate at any moment.
which remainds me, we haven't even talked about what happens if the USD has an accident. that is a serious weakpoint in any deflationist argument. they have to become apologists for the world's worst currency. as the world competes for physical goods, they have less justification to keep USD on life support. once the plug is pulled, rates are going up and inflation will be much worse. |
