The title kind of says it all, but there are far more serious consequences to the price of oil reaching $126/barrel, or wheat, corn, rice, soybeans, copper et al reaching exorbitantly inflated prices than Cisco or Juniper Systems or Yahoo stock behaving similarly, as they did in the late 1990's.
Commodities are things the "real" economy needs and uses to function. Commodities have "use" value. Stocks have only "exchange" value.
Nobody needs to buy Cisco at $90 per share. But people do need to buy oil at $126 per barrel.
I'll try writing further articles on the fungibility of various commodities--e.g., coffee vs. tea--but for now I'll only comment thus: Essential commodities are too important to the literal survival of the world to be treated as if they were common shares of Microsoft, mere vehicles of financial speculation. And these essential raw materials are now being transformed into speculative investment vehicles, probably through the ingenious proliferation of derivatives and the sudden attraction by "investors" to commodities as a better store of value than alternative investments.
Sometimes, most of the time, so-called free markets function quite efficiently. But there are exceptions, as even the most conservative of economists would agree.
We are right at the beginning of what could be a pernicious extension of free market, speculative capitalism into a sphere previously dominated by real-world economic conditions of supply and demand. For example, if suddenly the demand side for corn is radically increased not by more users of corn, but by speculators whose only concern is that the price of corn will rise, the use-market be damned, the risks of creating artificial non supply/demand dislocations to the real economy may have consequences that reach far beyond Forex traders.
This is a topic I'm researching and thinking about. It's very interesting, very complicated and urgently important.
More to come.
Showing posts with label wheat. Show all posts
Showing posts with label wheat. Show all posts
Friday, May 9, 2008
Thursday, May 1, 2008
War in Iraq, 21st Century Economics...Unpleasant Thoughts
I try to follow the coverage the media, both "mainstream" and "acceptable-alternative," gives various news stories.
Without question the Democrat Primary campaign gets the most ink day after day. And the coverage, as John Edwards' wife so ably pointed out in her NYTimes Op-Ed piece, almost solely concentrates on various tactics, gossip and the candidates' personalities.
So be it.
But here at this modest Blog, the temptation to do otherwise notwithstanding, I am resolved to write about important matters.
The two most important issues facing the United States (and by extension, the democratic, industrialized democracies) are the War in Iraq and the Economics of the 21st Century, particularly the unprecedented transfer of wealth from the aforementioned nations to the nations that produce exportable oil.
These are both complex issues not easily captured in sound bites or snapshots. To report on them, let alone analyze and comment (synthesize) on them, requires deep, sometimes long, thinking. That's not what media is all about. Mass media is about quick and easy; here today, gone tomorrow kind of stuff.
I'm not a media-guy, but neither am I an academic. I use my brain for sure; but I'm not afraid to use my human intuition either. I'm not an "expert" in/on anything. My only credential is the writing I produce.
As I indicated in a recent earlier blog, I am working on the general subject of the inexplicable spike in commodity prices, including without limitation such commodities as oil, corn, wheat, rice, and soybeans.
Concomitant with that work, I am thinking about the insidious transfer of wealth currently taking place, whereby nations such as the USA and Japan, for example, are having their wealth stolen by countries such as Saudi Arabia, Iran and Russia, for example. I have reached one conclusion thus-far:
THIS PHENOMENON IS THE GREATEST NATIONAL SECURITY THREAT CURRENTLY FACING THE INDUSTRIALIZED DEMOCRACIES; AND THE ELECTED LEADERSHIPS OF THESE DEMOCRACIES ARE SITTING WITH THEIR FINGERS UP THEIR COLLECTIVE ASSES WHILE THIS IS HAPPENING.
The War in (not with) Iraq is the other subject I am expending thought upon. The fabulousness of the USG miscalculations is unprecedented in our nation's history. And the relative acquiescence of the American public to this patent and self-destructing fiasco is nothing if not mysterious.
As part of this study, the grotesque suffering of the Iraqi people themselves due to our government's preposterous assumptions that under-girded our invasion is at the forefront of my thinking. For example, Iraq's population is approximately 8.3 per cent of that of the United States (25 million vs. 300 million;) therefore, to adjust Iraq casualty numbers to make them proportional to what those numbers would be in our country if the "war" were being fought on United States home-turf, one must multiply the Iraq citizen casualty numbers by a factor of 12! That means when 60 Iraqis die in a suicide bombing , it would be the equivalent of 720 Americans dying in a suicide bombing on United States soil.
So every time you read about X-number of Iraqis dying, multiply that number by 12 to appreciate the impact that those many deaths would have on us.
More and more to come on these, and other topics.
Without question the Democrat Primary campaign gets the most ink day after day. And the coverage, as John Edwards' wife so ably pointed out in her NYTimes Op-Ed piece, almost solely concentrates on various tactics, gossip and the candidates' personalities.
So be it.
But here at this modest Blog, the temptation to do otherwise notwithstanding, I am resolved to write about important matters.
The two most important issues facing the United States (and by extension, the democratic, industrialized democracies) are the War in Iraq and the Economics of the 21st Century, particularly the unprecedented transfer of wealth from the aforementioned nations to the nations that produce exportable oil.
These are both complex issues not easily captured in sound bites or snapshots. To report on them, let alone analyze and comment (synthesize) on them, requires deep, sometimes long, thinking. That's not what media is all about. Mass media is about quick and easy; here today, gone tomorrow kind of stuff.
I'm not a media-guy, but neither am I an academic. I use my brain for sure; but I'm not afraid to use my human intuition either. I'm not an "expert" in/on anything. My only credential is the writing I produce.
As I indicated in a recent earlier blog, I am working on the general subject of the inexplicable spike in commodity prices, including without limitation such commodities as oil, corn, wheat, rice, and soybeans.
Concomitant with that work, I am thinking about the insidious transfer of wealth currently taking place, whereby nations such as the USA and Japan, for example, are having their wealth stolen by countries such as Saudi Arabia, Iran and Russia, for example. I have reached one conclusion thus-far:
THIS PHENOMENON IS THE GREATEST NATIONAL SECURITY THREAT CURRENTLY FACING THE INDUSTRIALIZED DEMOCRACIES; AND THE ELECTED LEADERSHIPS OF THESE DEMOCRACIES ARE SITTING WITH THEIR FINGERS UP THEIR COLLECTIVE ASSES WHILE THIS IS HAPPENING.
The War in (not with) Iraq is the other subject I am expending thought upon. The fabulousness of the USG miscalculations is unprecedented in our nation's history. And the relative acquiescence of the American public to this patent and self-destructing fiasco is nothing if not mysterious.
As part of this study, the grotesque suffering of the Iraqi people themselves due to our government's preposterous assumptions that under-girded our invasion is at the forefront of my thinking. For example, Iraq's population is approximately 8.3 per cent of that of the United States (25 million vs. 300 million;) therefore, to adjust Iraq casualty numbers to make them proportional to what those numbers would be in our country if the "war" were being fought on United States home-turf, one must multiply the Iraq citizen casualty numbers by a factor of 12! That means when 60 Iraqis die in a suicide bombing , it would be the equivalent of 720 Americans dying in a suicide bombing on United States soil.
So every time you read about X-number of Iraqis dying, multiply that number by 12 to appreciate the impact that those many deaths would have on us.
More and more to come on these, and other topics.
Tuesday, April 29, 2008
Commodity, Dow Jones Industrial, Housing Prices
- I am working on a series articles about the current upward explosion in commodity prices. This article will require me to compile, analyze and synthesize a ton of data.
- This small blog presents links to easily understand charts of the prices of various commodities from 1999 to the present, starting with oil, which is the first link below.
- Interestingly, the start date for the rapid rise in oil prices is almost exactly the starting date of the invasion of Iraq: March 13, 2003. There is no evidence that I am aware of at this time that it any way establishes a causality relationship between the two phenomena, but the chart sure is interesting.
- Other links are to charts of prices of rice, wheat, corn and soybeans.
- This is the first of the series of articles alluded to above.
- [Don't be afraid of charts, they're easier to understand than my writing.]
- http://futures.tradingcharts.com/chart/CO/M
Price of oil 1999-2008. Starting date of the Iraq War: March 13, 2003
Dow bottoms approx. March 13, 2003
http://futures.tradingcharts.com/chart/CN/M
Price of corn 1999-2008
http://futures.tradingcharts.com/chart/RI/M
Price of Rice 1999-2008
http://futures.tradingcharts.com/chart/CW/M
Price of Wheat 1999-2008
http://futures.tradingcharts.com/chart/SB/M
Price of soybeans 1999-2008
http://www2.standardandpoors.com/spf/pdf/index/CS_HomePrice_Release_042952.pdf
S7P/Case-Shiller Home Price Indices, Feb2008
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