- Reaction score
- 35
- Points
- 560
Jerry Pournelle looks at the long term:
http://jerrypournelle.com/view/2011/Q2/view672.html#Monday
http://jerrypournelle.com/view/2011/Q2/view672.html#Monday
Gold and silver prices are up again. There's a fairly cool-headed analysis in the International Business Times http://www.ibtimes.com/articles/
137709/20110425/gold-silver-prices
-inflation-bubble.htm that's worth your reading; do understand that there's no industrial justification for the prices gold and silver have climbed to. To some extent the price of gold depends on the price of oil, and of course the price of the dollar. Don't bet the farm on gold, but if there's a real runaway inflation, having physical possession of gold and silver is one hedge. Note that wheat futures are up around $8 a bushel, which is quite a lot compared to the $3 wheat of last spring. Wheat prices depend on consumption and production. Unlike oil, wheat production depends on a number of factors like drought and climate (as well as oil prices which affect fertilizer and transportation costs) more than on political decisions such as the US decisions on oil production in Iraq and the OPEC production schedules. Speculation oil prices -- futures -- are driven by expectations. An OPEC announcement of greatly increased production would drive spot oil prices down dramatically, as history has shown -- note that Reagan's announcement of increased drilling, which had no immediate effect on oil production, drive down gas prices at the pump within weeks. (Interpolation, the same thing happend in 2008 when President George W Bush signed an executive order lifting drilling bans. PErhaps he is talking about that event)
It's not so clear about food prices. Note that demand for wheat is rising in China and will slowly but steadily rise as long as the Chinese economic boom continues. As Chinese wealth trickles down, more Chinese want meat, and that increases demand for animal feed and -- All the same for India. So long as China, and increasingly India, have growing middle clases who want higher quality foods, the demands for wheat will grow. Meanwhile Arab Spring brings economic collapse in Egypt and other Middle East areas, but doesn't much lower food requirements for those populations. The oil kingdoms will simply bid against the Chinese. Egypt, the largest and hungriest of the Arab lands, can't do that. Economic freedom can produce economic booms, but that doesn't happen immediately, and isn't all that likely an outcome of the Arab Spring movements anyway.
The US could have some effect on food price futures by ending the alcohol as fuel subsidies and requirements. If you don't burn coal in your car, the price of masa will fall almost immediately.
We have an election coming up. We also have $5/gallon gasoline and $5/loaf bread coming up. I do not expect the real unemployment rate to fall, although there will be frantic attempts to make it look lower, largely through statistical manipulations based on the definition of unemployment: if you're not looking for work, you aren't unemployed even if you have no job and never again expect to find one. As more give up looking, the unemployment rate goes down. And since the unions do not intend to lower their wages and perks, and the states are out of money, there will be "furloughs" among public employees including teachers. You can manipulate those numbers so the "furloughed" are not unemployed. It promises to be an interesting summer, but it will end with $5/gallon gasoline and $5/loaf bread. Look for the price of a can of beans to get higher. Look for the price of Top Ramen to rise...
This will continue so long as the current economic and foreign policies continue.
Note that I'm not giving advice on metals and food futures investments. I'm just saying...