Comments on: Commodities Continue to Tank http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html Sun, 22 Nov 2009 07:56:24 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Juan http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21610 Juan Wed, 15 Oct 2008 02:44:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21610 Douglas, if we go back to 1998, Matt Simmons 'blamed' speculators for what he considered too low oil prices. But dreams magically come true and, driven by new deregulations, IB recommendations, changes in the price formation regime, expanded number/size of commodity funds, new long-only 'players', cheap money, stories promoting ideas of unending demand rise and imminent scarcity, etc, away we went into self-fulfilling bubbleville.<br/><br/>Congressional Committees, from I think 2002, did little more than huff and puff -- even as some folks at the newly ICE owned IPE knew quite well that price was moving beyond fundamentals, as I would at least expect some on NYMEX also did. <br/><br/>So higher and higher commodity prices, particularly in foodstuffs, drove cost of reproduction of labor power up, up, up, which when placed against nominal wages became an attack on the very foundation of capital, living labor. Under cover of financial spectacle and fictitious profit, the system regressed, moved into contracting reproduction... Markets notice with a sometimes long lag. Douglas, if we go back to 1998, Matt Simmons ‘blamed’ speculators for what he considered too low oil prices. But dreams magically come true and, driven by new deregulations, IB recommendations, changes in the price formation regime, expanded number/size of commodity funds, new long-only ‘players’, cheap money, stories promoting ideas of unending demand rise and imminent scarcity, etc, away we went into self-fulfilling bubbleville.

Congressional Committees, from I think 2002, did little more than huff and puff — even as some folks at the newly ICE owned IPE knew quite well that price was moving beyond fundamentals, as I would at least expect some on NYMEX also did.

So higher and higher commodity prices, particularly in foodstuffs, drove cost of reproduction of labor power up, up, up, which when placed against nominal wages became an attack on the very foundation of capital, living labor. Under cover of financial spectacle and fictitious profit, the system regressed, moved into contracting reproduction… Markets notice with a sometimes long lag.

]]> By: Douglas http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21589 Douglas Wed, 15 Oct 2008 00:12:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21589 Gold investors / hedgers have not bought into the deflation story.<br/><br/>Any story about inflation and "busted commodity bubbles" that ignores gold is sirenesque.<br/><br/>Deflation is a fear. It is also a media buzz word. Falling housing prices does not mean "deflation". It means an asset is declining in price. <br/><br/>Rents where I live are on the rise as people chose to rent instead of buy. There is inflationary fallout from the housing bust.<br/><br/>Rents -> CPI component.<br/><br/>The deflation enthusiasts should go to their bank, withdraw their cash and fill safe deposit boxes with bricks of hundred dollar bills. Cause those bills are going to get scarcer in the future!! Be worth more!! Will buy more product than they do today!! That would be rational. But, is anyone actually doing that? Gold investors / hedgers have not bought into the deflation story.

Any story about inflation and "busted commodity bubbles" that ignores gold is sirenesque.

Deflation is a fear. It is also a media buzz word. Falling housing prices does not mean "deflation". It means an asset is declining in price.

Rents where I live are on the rise as people chose to rent instead of buy. There is inflationary fallout from the housing bust.

Rents -> CPI component.

The deflation enthusiasts should go to their bank, withdraw their cash and fill safe deposit boxes with bricks of hundred dollar bills. Cause those bills are going to get scarcer in the future!! Be worth more!! Will buy more product than they do today!! That would be rational. But, is anyone actually doing that?

]]> By: Anonymous http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21578 Anonymous Tue, 14 Oct 2008 23:25:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21578 Most investors have bought in to the deflation story as it serves many purposes. When the US dollar starts tanking who will be holding the commodity stocks? Most investors have bought in to the deflation story as it serves many purposes. When the US dollar starts tanking who will be holding the commodity stocks?

]]> By: Douglas http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21545 Douglas Tue, 14 Oct 2008 19:20:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21545 a "credit contraction" ? I've seen estimates that the federal budget deficit for next year will top 2 trillion. <br/><br/>The response by Governments around the world is to "printfaster". <br/><br/>The recent action in the 30 Year Treasury Bond is ominous. Pull up a chart of the december future USZ08.<br/><br/>Hard to see the USD buying a bigger basket of goods anytime soon.<br/><br/>from 1930 to 1940 $100 deflated to $83.83. but by 1950 that same $100 had inflated to $144.31.<br/><br/>http://data.bls.gov/cgi-bin/cpicalc.pl a “credit contraction” ? I’ve seen estimates that the federal budget deficit for next year will top 2 trillion.

The response by Governments around the world is to “printfaster”.

The recent action in the 30 Year Treasury Bond is ominous. Pull up a chart of the december future USZ08.

Hard to see the USD buying a bigger basket of goods anytime soon.

from 1930 to 1940 $100 deflated to $83.83. but by 1950 that same $100 had inflated to $144.31.

http://data.bls.gov/cgi-bin/cpicalc.pl

]]> By: scott http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21525 scott Tue, 14 Oct 2008 15:39:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21525 i don't see whats to argue about. Clearly markets of all sorts are going through a deflationary period. The actions taken by world monetary authorities are inflationary. The time it takes supply and demand forces to push prices higher in most commodities may be a little ways off yet, perhaps 1 to two years down the road. Supply and demand, despite any demand destruction or whatever, will not be able to supply the world with what it needs for decades to come. Ponder this, had commodities or better yet supply and demand fundamentals for most commodities been tight on the supply side going into 2000 and 2001 what would have wheat, gold, beans, etc prices looked liked? Since the beginning of the deflation in 2000 we have been inflation fighting this thing. A period of deflation is fine by me. i don’t see whats to argue about. Clearly markets of all sorts are going through a deflationary period. The actions taken by world monetary authorities are inflationary. The time it takes supply and demand forces to push prices higher in most commodities may be a little ways off yet, perhaps 1 to two years down the road. Supply and demand, despite any demand destruction or whatever, will not be able to supply the world with what it needs for decades to come. Ponder this, had commodities or better yet supply and demand fundamentals for most commodities been tight on the supply side going into 2000 and 2001 what would have wheat, gold, beans, etc prices looked liked? Since the beginning of the deflation in 2000 we have been inflation fighting this thing. A period of deflation is fine by me.

]]> By: jest http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21518 jest Tue, 14 Oct 2008 14:56:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21518 Matt Dubuque said...<br/>Matt Dubuque<br/><br/>"Inflation does not flourish in a recession."<br/><br/>then why aren't the airlines taking back their baggage fees, due to falling fuel costs?<br/><br/>why did dominoes pizza recently double their fuel delivery charge?<br/><br/>my bills aren't deflating at all.<br/><br/>deflation should also lead to lower interest rates, but *all* of them are spiking. Matt Dubuque said…
Matt Dubuque

“Inflation does not flourish in a recession.”

then why aren’t the airlines taking back their baggage fees, due to falling fuel costs?

why did dominoes pizza recently double their fuel delivery charge?

my bills aren’t deflating at all.

deflation should also lead to lower interest rates, but *all* of them are spiking.

]]> By: mxq http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21516 mxq Tue, 14 Oct 2008 14:45:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21516 I'm dawning my tin-foil hat and jumping on board with gheit...commodity bull, GS, tanks their oil target to $50 from $200 in mere weeks (yesterday, they finally followed the herd and said $50 low possibility). Tuesday, the treasury annouces direct capital injections into GS and a number of other banks. <br/><br/>imo, the back-room deals with the 5 families on sunday night probably went something like, "lay off the commodities or else." <br/><br/>I can't imagine anybody in congress could look themselves in the mirror 6 months down the road, having direct investments in these banks, yet having to hold "excessive speculation" hearings again.<br/><br/>MS and GS already have to divest a lot of their energy assets now that they are BHC's, but i think they got an extension from previously 2 years to a window of 5 years. Maybe this potentionally fictitious backroom "understanding" is a way to effectively pre-empt this window.<br/><br/>But again, my argument has nothing to do with fundamentals and is strictly conspiratory in nature. I’m dawning my tin-foil hat and jumping on board with gheit…commodity bull, GS, tanks their oil target to $50 from $200 in mere weeks (yesterday, they finally followed the herd and said $50 low possibility). Tuesday, the treasury annouces direct capital injections into GS and a number of other banks.

imo, the back-room deals with the 5 families on sunday night probably went something like, “lay off the commodities or else.”

I can’t imagine anybody in congress could look themselves in the mirror 6 months down the road, having direct investments in these banks, yet having to hold “excessive speculation” hearings again.

MS and GS already have to divest a lot of their energy assets now that they are BHC’s, but i think they got an extension from previously 2 years to a window of 5 years. Maybe this potentionally fictitious backroom “understanding” is a way to effectively pre-empt this window.

But again, my argument has nothing to do with fundamentals and is strictly conspiratory in nature.

]]> By: printfaster http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21513 printfaster Tue, 14 Oct 2008 14:30:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21513 Matt Dubuque said... <br/>Matt Dubuque<br/><br/>"Inflation does not flourish in a recession."<br/><br/>Matt Dubuque<br/>---<br/><br/>Har har, Harari. Tell that to Robert Mugabe, he should be able to print more money without risking inflation. Matt Dubuque said…
Matt Dubuque

“Inflation does not flourish in a recession.”

Matt Dubuque
—

Har har, Harari. Tell that to Robert Mugabe, he should be able to print more money without risking inflation.

]]> By: Matt Dubuque http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21500 Matt Dubuque Tue, 14 Oct 2008 13:19:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21500 Matt Dubuque<br/><br/>"Inflation does not flourish in a recession."<br/><br/>Matt Dubuque Matt Dubuque

“Inflation does not flourish in a recession.”

Matt Dubuque

]]> By: Owner Earnings http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank.html#comment-21484 Owner Earnings Tue, 14 Oct 2008 11:48:00 +0000 http://www.nakedcapitalism.com/2008/10/commodities-continue-to-tank/#comment-21484 Deflation (credit contraction) is certianly more probable than inflation.<br/><br/>$20-30 trillion in assets has just vanished. Deflation (credit contraction) is certianly more probable than inflation.

$20-30 trillion in assets has just vanished.

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