Despite fears of deflation, prices spiking for food, metals, fuels__________________________________________________________________________________
Tuesday, January 18, 2011
If you can eat it, bend it or pour it in your car's tank, it's getting more expensive.
Now appears to be a good time to own an oil well or a cornfield or a copper mine. Things that come out of the ground seem valuable at the moment, and that's a lot better for producers than it is for consumers.
Prices of the world's most important commodities, from corn to copper to crude oil, have soared to levels last seen in the summer of 2008, before the global financial crisis hit.
That period, in hindsight, looks like a massive speculative bubble. So, do today's markets make any more sense?
Perhaps. Supplies of food crops like corn and soybeans are tight after a year of bad weather around the world. China's fast-growing economy continues to need more metal to build houses and skyscrapers and more oil to run cars and factories.
So at least there's a plausible story to explain corn at $6.50 a bushel, up from $3.50 a year ago, and oil at $91 a barrel, up from $34 in early 2009.
But big questions remain: Will higher commodity prices derail an economic recovery that's just starting to gain traction in the U.S.? And are they sending a troublesome inflation signal even as the Federal Reserve continues to fight the opposite malady, deflation?
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