Content-Type: text/html Slower Economic Growth or Higher Commodity Prices? Take your pick. Monster stagflation is here.
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Slower Economic Growth or Higher Commodity Prices? Take your pick. Monster stagflation is here.

Updated: 2011-08-07 13:58:40

In 2008, we began to see resource prices, particularly oil, sky-rocket to new highs. However, the 2008 credit/housing crisis quickly changed that. Really, though, it postponed it. Partially, what we are seeing now with commodities involves at least two factors: cheaper dollars and a growing global economy. Higher demand for commodities all over the world kicks prices higher, and increases in oil prices due to various issues around the globe also inflates prices due to higher transportation and manufacturing costs.

However, understand that the primary factor in higher resource prices is likely due to the rise of the global economy. There are more people today consuming commodities. This is inescapable barring a major disaster resulting in depopulation.

The United States government has approached the 2008 crisis using various forms of stimulus. Stimulus re-engages the growth of the economy, and this is the very problem with their tactic. By using stimulus to blow up the economic balloon, we raise demand on commodities again, and this returns us to the problems we encountered prior to the 2008 crisis. However, the primary issue is that the economic balloon is inflated with hollow stimulus.

Our hollow stimulus kick starts our economy, but since it is not geared by true economic production, wealth, and strength, we hit a glass ceiling of higher commodity prices, which is impending. Therefore, I predict all stimulus measures will fail because the real crisis we are facing is not deflation. The real crisis is fewer resources to share across the globe.

I am troubled that someone will realize they can use military strength to solve this problem.This is already happening to a degree. Wait until this escalates. I predict it will.


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