Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Nihontochicken who wrote (101018)	8/19/2009 4:43:00 PM
From: Real Man	Read Replies (1) of 116555

You found no evidence of deflation until the global economy crashed. In fact, some commodities soared 2-3 fold and oil traded at 148 in the Summer of 2008, gas above $4. All this time there were significant credit problems that started in Spring 2006. As the economy crashed, this resulted in demand destruction, while supply was still there from the early 2008 crack up boom. That dropped commodities way below cost of production. Supply is also elastic, nobody will extract nothing below cost, or, if they do, they will go BK. The latter may take a few more months. Commodities won't stay here long. As they do, shortages will develop and push prices higher. Such sharp drop in commodities was because the global economy did not soft land, it crashed, right from crack up boom. $100 oil by next Summer will not surprise me, while natural gas for this Winter is currently priced 50% higher than spot.

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