There was actually a rather good piece by Todd Sullivan.
The point being: Commodity prices have very little to do with the economic growth environment at the moment and everything to do with speculators getting out of commodities.
I think Todd Sullivan is spot on here. Common sense is not always to be despised.
If you look at raw materials across the board they all drop.
Especially iron ore. To speculate in rising iron ore price – when the recycled steel is totally unaffected – seems to be an unpractical form of the Dutch tulip bulb bubble boom a couple of centuries ago (they still haven’t gotten rid of the damned inedible vegetables). I mean: Tearing down a mountain – bringing it across the ocean – just to pile it as rubble? A Fred Flintstone science project?
I might start getting apprehensive when they start dredging the Baltic and the North Sea for large lumps of scrap in poor state of repair – with the object of melting it down to steel. Considering the amount of energy going into producing steel from iron ore, then such a project would be a winner – if “shortage of energy and raw materials” really was an issue.
But as long as they are sinking old ships and airliners into the sea to relieve the severe housing shortage among socially disadvantaged fish and arthropods my pulse remains temperate.
It is not really a currency flap either.
Several loud whines have been uttered over the EUR crisis. The German Finance Minister is sputtering with rage over the German Supreme Court and their tardiness – but then again he is always like bacon dropped on a hot frying pan.
After munching a few sedatives: How much do you think the Euro-zone really deplores the fact that the EUR has dropped 12% with respect to the USD since last year? It might not have been planned that way; but when opportunity knocks on a export salesman’s door – why not open up?
On top of that: A 25% discount on oil price the last couple of months does make the grief a bit easier to bear for the motorists and industrialists.
That leaves speculators with severe burns on the paws.
You can say about gold what you want, but storage-wise it is a bit more practical than iron ore.
What isn’t perfectly clear is how much securities are affected.
Another thing is that price on rice and soybeans haven’t come down – they eat a lot of rice in China.