Could somebody please tell the commodity price party to keep the noise down-the U.S. economy is trying to sleep. The Reuters/Jefferies CRB Future Price Index for Commodities came within a heartbeat of establishing another record high this week, led by $116 oil. While it’s tempting, to dismiss the persistent commodity surge as speculative, the inconvenient counter-point to that theory is that many non-exchange traded prices are ramping up even more quickly (e.g..iron, potash). Is it possible that while the bulk of the financial world was busy navel-gazing at the “worst crisis since the depression”, it may have overlooked a potentially bigger and more lasting problem hurtling down the mountain i.e. raging global inflation pressures?
Many have been calling for a softening U.S. economy to undercut strong commodity prices. It’s increasingly looking like those tables have been turned-persistently strong commodities are threatening to further undercut a struggling US economy. That is, the ongoing strength in food and oil prices themselves will act as an added drag on U.S. growth, by sapping consumer spending power. The challenge for the global economy would be if commodity prices kept rising even if the US$ begins to find firm footing.
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