http://theunbrokenwindow.com/2008/02/28/bye-bye-to-bread/ The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. - F.A. Hayek Thu, 24 May 2012 00:10:01 +0000 hourly 1 http://wordpress.org/?v=3.0.3 http://theunbrokenwindow.com/2008/02/28/bye-bye-to-bread/comment-page-1/#comment-31 Brad Samples Fri, 29 Feb 2008 00:08:36 +0000 http://theunbrokenwindow.com/2008/02/28/bye-bye-to-bread/#comment-31 We are certainly seeing increased speculative interest in the commodity sector (though this is a net positive!), but that alone explains a small fraction of the meteoric rise in commodity prices since roughly 2004-ish. Speculators follow trends, they don't set the agenda. It might sound hackneyed, but it all goes back to simple supply and demand. Commodity investment is highly cyclical - it takes time to increase supply, and simply put, supply growth in oil and gold and food hasn't kept up with demand growth (you can blame market distortions for part of this - oil price controls in China, shifty tax regimes in Canada, corporate corn welfare in the US, etc) . But the price-signaling function of futures markets is working, just look at the latest USDA crop report... We are certainly seeing increased speculative interest in the commodity sector (though this is a net positive!), but that alone explains a small fraction of the meteoric rise in commodity prices since roughly 2004-ish. Speculators follow trends, they don’t set the agenda. It might sound hackneyed, but it all goes back to simple supply and demand. Commodity investment is highly cyclical – it takes time to increase supply, and simply put, supply growth in oil and gold and food hasn’t kept up with demand growth (you can blame market distortions for part of this – oil price controls in China, shifty tax regimes in Canada, corporate corn welfare in the US, etc) . But the price-signaling function of futures markets is working, just look at the latest USDA crop report…

]]> http://theunbrokenwindow.com/2008/02/28/bye-bye-to-bread/comment-page-1/#comment-30 Econobran Thu, 28 Feb 2008 16:28:31 +0000 http://theunbrokenwindow.com/2008/02/28/bye-bye-to-bread/#comment-30 Would it have anything to do with the housing bust and the subprime fallout? Given that a lot of commodity prices have increased or remained strong, would it be safe to say that investors are switching to commodities such as gold, oil, wheat, etc? Has this, in turn, had an affect on inflation? Would it have anything to do with the housing bust and the subprime fallout? Given that a lot of commodity prices have increased or remained strong, would it be safe to say that investors are switching to commodities such as gold, oil, wheat, etc? Has this, in turn, had an affect on inflation?

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