Category Archives: Commodities

2011: The Year For Cautious Optimism?

Edward Harrison here with my economic view for the new year. I am generally cautiously optimistic on the U.S. and global economy for 2011. Policy makers have done a pretty good job of avoiding egregious errors so far. I think that gives us enough oomph to get over the hump so the cyclical agents like inventories and cyclical hiring can do their magic. I do have lingering concerns. Let me explain both pieces of the puzzle – the cautious part and the optimistic part – in this post.

The Imagination Trade, or the Tinkerbell Market 2.0

I’ve refrained from discussing the stock market for quite some time, in part because this is not an investment website and in part because I find the netherworld of credit more interesting. But a big reason of late is that the stock market has become so utterly unhinged from fundamentals that anyone opining on it, other than momentum trades and technicians with particularly good crystal balls, is likely to look silly.

We seem to be in a toxic replay of what I called the Tinkerbell market in 2007 and 2008: if the officialdom can get enough people to applaud, the economy will live. They weren’t too successful back then, but the crisis has appeared to have upped the game of the Powers That Be in talking up the price of financial instruments. And having the Fed at ready to provide boatloads of liquidity should anything go awry appears to have put much of the world in “don’t fight the Fed” mode.

Market action is looking a tad manic, yet the dot-com mania proved that unwarranted optimism can persist far longer than cooler heads deem possible. Hedge fund leverage, for instance, is allegedly back to pre-crisis highs.

La Niña as Black Swan – Energy, Food Prices, and Chinese Economy Among Likely Casualites

Reader Crocodile Chuck highlighted an important post at Houses and Holes, an economics-oriented Australian blog. While Australia is reeling from the immediate impact, the broader impact of 2010-11 weather patterns may have much bigger ramifications for food and energy prices in Australia and abroad.

The post focuses on the possibility, increasingly endorsed by top meteorologists, that the heavy Australian rains are the result of a super La Niña, the last of which was seen in 1973-4,the time of the last severe flooding in Queensland. Super La Niñas are hugely disruptive to agricultural production and can have other nasty knock-on effects (some contend the 1917 La Niña helped spawn the 1918 influenza pandemic).

In this case, the damage of a super La Niña will not only increase food costs at a time when price rises and food scarcity are already a major concern, but will likely extend to energy prices as well. That one-two punch would be particularly devastating to China.

Jim Quinn: Lies Across America

Yves here. While Quinn has a deliberately (some might say overly) provocative style and I quibble with some of his supporting arguments, his overarching observation, that America is wedded to an economic model past its sell by date, and that model has damaging social and political consequences, is one I believe will resonate with many […]

China Wants Concessions for Mercantilism in Return for Rare Earths

A story in Reuters signals that China is willing to soften its stance on rare earths. But of course, it has no reason to offer such a concession for free. The article indicates that China wants its trade partners to back off on their pressure on China to curb its abuses of international trade rules. […]

QE2: Bernanke Cuts Geithner Off at the Knees

The Fed’s announcement of $600 billion of intermediate and long Treasury purchase, informally dubbed QE2, teed off a peppy rally in stocks, and led to further weakening of the dollar. These trends were already well in motion thanks to the central bank’s winks and nods that it was going to embark on another round of […]

US Faces Substantial Obstacles to Increasing Rare Earths Production

Reader James S. highlighted a useful article at the MIT Technology Review, “Can the U.S. Rare-Earth Industry Rebound?” Our only quibble to this solid piece is its summary, which underplays some critical aspects of the article: The U.S. has plenty of the metals that are critical to many green-energy technologies, but engineering and R&D expertise […]

China Drops Rare Earths Ban

Here’s the update, per the New York Times: The Chinese government on Thursday abruptly ended its unannounced export embargo on crucial rare earth minerals to the United States, Europe and Japan, four industry officials said. The embargo, which has raised trade tensions, ended as it had begun — with no official acknowledgment from Beijing, or […]

“A currency war the US cannot win”

Yves here. This post cites a number of recent Western commentaries on China’s currency policies; I suggest, for one stop shopping, you read Martin Wolf comment, “Why America is going to win the global currency battle.” There are several points in the argument below that are curious, to say the least. One is the notion […]

Stiglitz Bashes QE

The comment by Joseph Stiglitz in the Financial Times lambasting the Fed’s expected move to quantitative easing is certain to have no impact on the central bank’s course of action. His article nevertheless is proof that this idea is not as well received as the officialdom would like you to believe. It isn’t merely Stiglitz’s […]

Rare Earths Row Continues to Build

Bloomberg reported on a rather peculiar announcement from the Chinese officialdom, which comes off as a rather lame rationalization of its ban on rare earths exports. If you are late to this cause celebre, rare earths confusingly really aren’t rare, but they are found only in fairly low concentrations and are nasty to mine. They […]

Has the Fed Painted Itself Into a Corner?

A couple of articles in the Wall Street Journal, reporting on a conference at the Boston Fed, indicates that some people at the Fed may recognize that the central bank has boxed itself in more than a tad. The first is on the question of whether the Fed is in a liquidity trap. A lot […]

Auerback: You Can Thank Ben Bernanke for Higher Food Prices

By Marshall Auerback, a portfolio strategist and hedge fund manager who writes for New Deal 2.0 Although I have consistently taken the line that QE is totally useless, in effect an accounting trick which does little for real economic activity, I should have at least acknowledged its powers in terms of fomenting casino-like speculation in […]

“Summer” Rerun: Is the Commodities Boom Driven by Speculation?

This post first appeared on May 9, 2008 The question above may seem foolish. Oil has just passed $124 a barrel despite improvement in the dollar. Commodities prices are moving less in lockstep than before (gold and wheat in particular have backed off significantly from their highs) suggesting that buying is not the result of […]

Now It’s Official: Obama Administration Blocked Scientist Estimates on BP Spill

Last night, some fresh comments by Obama Administration officials confirmed its cynicism and duplicity in its Ministry of Truth version of health care reform. It’s one thing to suspect Team Obama was playing the public for a fool, quite another to have proof. Today we have more corroboration of Obama Administration double dealing, this on […]