Well, but commodities are becoming a much smaller fraction of total GDP. For example, we use much less oil per GDP than even just 20 years ago, and it shrinks every year.Food costs (as Carpe Diem points out) are smaller and smaller fractions of household budgets over the decades. Meanwhile, big ticket items keep going down in price.Housing is cheap now. All commercial space is cheap right now--retail, industrial, office. Office space in downtown Los Angeles is renting for the same now it did in 1979. $3 a sf monthly for class A space. Unit labor costs have been falling, through 2009-2010.If housing costs are down, if commercial space costs are down, if labor is going down--where do you get inflation? On commodities? The worst response now would be to do a japan--start fighting inflation when it is low single digits and the economy is still weak. The Japan perma-recession is a longstanding and thorough experiment in the hazards of tight money. Oh, you can snuff out inflation. You can also drive wages, property markets and equities down for 20 years running. Is that worth it? I submit it is not. The Nipponistas are the biggest threat to America today.
As far as inflation...can peopledemand higher wages???...can i raisethe price of my house if i want to sell?? Now if i want a cup of coffee with a couple of tablespoonsoof sugar...
The USA economy tends to undercut inflation. If cars prices go up, importers being in a lot more cars. If wages go up, workers pour across the border. If we need capital, it comes across instantly, by the hundreds of billions. Even services can be imported by the miracle of the Internet. Where is the workforce today militating for higher wages? Where are houses shooting up in price? Where is the auto dealer saying, "Well, if you want to buy it today, there is a premium." Where is the commercial landlord who says, "Of course, there is a key fee also." Ain't there Jack, and we are years from there.QE3? Pout it on Bernanke, pour it on, pull out the corks, tips over the barrels, set the whole damn place on fire, and dance naked in the street. A weak, feeble Japanese monetary policy is the last thing we need now.
Steel, copper, oil, gold, silver, corn, cotton, cattle, etc. all look like Scott's chart of CRB Raw Ind Index.Benjamin says "pour it on". I guess he went to the Joe Binden school of economics, "if we don't keep on spending we'll go broke".We are going to be looking like Argentina...and not in "years". Start warming up Ben...'don't cry for me Argentina...'
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