Comments on: The World Bank Goes Nuclear on Commodities

By: Economic analysis | The World Bank Goes Nuclear on Commodities - Contrarian Stock Market Investing News - Featuring Bargain Stocks

Thu, 29 Jan 2009 19:20:05 +0000

[...] found anything to substantiate them. We’re looking around, and will report back on what Diggers and Drillers editor Al Robinson digs up as well. Until [...]

By: Pat Donnelly

Pat Donnelly — Mon, 15 Dec 2008 06:28:47 +0000

The objective of those who govern is to keep those, whom they govern, busy. That way they will be happy and productive. Polemic of dead German Jews is not relevant, except to one way to keep folks busy: hate others and use their emotional energy to be more productive. And destructive. That way demand is created. Not all governors are so short sighted. The space race was one way. Destructive of capital, but not of humans. The pyramids likewise. Some long term productivity is always achieved mainly because those governors get to refine results. Killing governors while satisfying, means the fruits even of destructive labour, is lost to us. Thus we may repeat our errors.
Ultimately we need full discussion of these things and then erect the appropriate feedback mechanisms. All bubbles can be pricked or they can be slowly deflated but left to the "market" they will distort for far too long.

By: Bernard Bortnick

Bernard Bortnick — Sun, 14 Dec 2008 00:46:51 +0000

Let's go back to basics: "The last cause of all real crises always remains the poverty and restricted consumption of the masses as compared to the tendency of capitalist production to develop the productive forces in such a way, that only the absolute power of consumption of the entire society would be their limit". (Marx V.III, Capital, p568, Kerr) Capitalism can't last forever you know and socialism and production for use not profit is pounding at the door.

By: Ross

Ross — Thu, 11 Dec 2008 00:23:10 +0000

@ Coffeeaddict, extrapolating at household level a severe income fall, it will feed asset price deflation rather than inflation. Bringing the past issued current account deficit debt back onto the local balance sheet can surely only be done by monetising but could provide the inverse effect to the past 30 year in terms of 'flationary relativity (asset prices & rents now deflating while those isolated items in the bodgy ABS CPI like food inflate). Monetising should deflate a floating currency (automatic stabiliser) but anyone that thinks that currencies are floating freely right now is "optimistic". Just look at the kiwi vs fundamentals, and how they have propped the pound up, and how they went to work on the usd-euro. Beyond the kiwi-aud cross the aud has probably been closest to fundamentals due to the hedge fund pullout from commodities and the yen & real movements make sense but the rest? Import price inflation should cause a severe drop in discretionary import volumes which could compensate for the export income drop (remember how our terms of trade skyrocketed yet we still couldn't get a trade surplus - that was more discretionary imports than capital equipment thats for sure. I certainly don't believe in J curves and don't discount inflation but I think it will hit at food because no one can afford to take stakes in financing the inventory (leveraged punter or manufacturer) and the velocity is increasing radically with smaller and smaller orders.

By: Coffee Addict

Coffee Addict — Wed, 10 Dec 2008 23:40:55 +0000

Jon says "There are too many people trying to make money out of doing nothing except swapping bits of paper around."

I agree. The usual combined, net result for both parties to any paper shuffling (or electronic trading) is zero.

With the gains (that were made) now squirreled away in unsafe bonds and in propped up banks - the global velocity (and momentum) of money MUST have fallen off a cliff. Because of this, central banks say they can run their printing presses with impunity. My intuitive bet is that they are wrong.

Current central bank policy is akin to a doctor who gives you a blood pressure medication with severe and unknown side effects. Your blood pressure (aka. inflation/asset deflation) will look good on the surface but at what cost? We all need to do a lot more thinking about this. At the end of the day, all the debt churning and loss socialisation in the world won't produce any new output or wealth. As argued by others on this site, current central bank policies will significantly misallocate resources thus further reducing global wealth and extending the duration of discomfort.

Perhaps we also need to view "true" inflation as a price index relative to something other that a fiat currency base. Would national and global income purchasing power bases be more appropriate? Using this alternate base, even static fiat currency prices and asset values may represent a high inflation rate IF real incomes are going over the cliff. Maybe Steve Keen and his peers could consider the current paradox further. Any thoughts Dan?

By: Jon Bain

Jon Bain — Wed, 10 Dec 2008 22:49:28 +0000

I think its too much 'wealthy money' trying to make money out of money as quickly as possible. The housing bubble caused much loss of wealth for many. But those who sold at the right time made lots of money. Now what do they do with it? They buy stocks. When that bombs out, they buy US bonds. But the world can only produce and consume at a steady rate. There are too many people trying to make money out of doing nothing except swapping bits of paper around.

You only get fruit from a tree after years of patience and nurturing. You have to ask, what do these people want so much that they are ignoring this basic notion?

By: Ross

Ross — Wed, 10 Dec 2008 05:24:30 +0000

I can taste that milk!