Krugman: Rising commodity prices have nothing to do with Fed money printing

[Slimprofits]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

i think he leaves out some intervening variables. in large measure, u.s. stimulus - both fiscal and monetary - has "leaked" to the developing world, fueling the growth there while the u.s. remains anemic. the growth of the developing world fuels world commodity demand, driving up prices. thus, he is right that there is no DIRECT connection between printing and commodity prices.

actually, there is one other indirect connection, to which he alludes. money printing has encouraged speculation in commodities, which has added to their rise.

You're smart guy and I appreciate this explanation (pretty much all of your posts are worth reading), but I think all of you are missing the point.

It's the New York Times, the newspaper of record.

It's Paul Krugman, the economist that every Democrat holds up as THE MAN. The economist whose viewpoints will be repeated by everyone else in the media and in the government that isn't a GOP.

This isn't a economic report from Krugman, it's a political report. Treat it as such.

[jk]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

You're smart guy and I appreciate this explanation (pretty much all of your posts are worth reading), but I think all of you are missing the point.

It's the New York Times, the newspaper of record.

It's Paul Krugman, the economist that every Democrat holds up as THE MAN. The economist whose viewpoints will be repeated by everyone else in the media and in the government that isn't a GOP.

This isn't a economic report from Krugman, it's a political report. Treat it as such.

krugman certainly has a political agenda, but i think it's worth unpacking how the data gets manipulated, whether by krugman or by free market fundamentalists. the exercise helps us stay focused on what's really happening.

[jtabeb]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

krugman certainly has a political agenda, but i think it's worth unpacking how the data gets manipulated, whether by krugman or by free market fundamentalists. the exercise helps us stay focused on what's really happening.

Absolutely! No passes (esp. FIRE PASSES) This crap has to be called out for what it is each and every time it's put out there.

[Starving Steve]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

Why sad? It's a reasonable explanation.

When the Fed is printing money to buy-back U.S. treasury debt (at debt-auctions) and keep interest rates near zero, it is hard for me to sell stoxx or sell commodities or sell anything to deposit money in the bank--- and earn zero.

Let me go over this once more for the slow-learners here: Would you sell oil or sell gold or sell your home or sell your stocks or sell anything, to run to the bank and deposit money at zero interest rates? Would you fall-all-over-yourself to buy U.S. Treasury debt that earns zero?

And add to this toxic policy a slight bias for energy prices and utility prices and taxes and insurance and necessities to rise........ What would you do? Would you run to the bank to deposit money at zero interest rates?

And add to this toxic brew a slight bias by governments to squander money. Would you invest in sovereign debt that earns zero--- even negative real-returns? Which sovereign would you trust?

This is sooooooo difficult for me. Could I ask for more time to answer?

No! I don't like gold at $1300, nor oil at $90, nor U.S. stocks at these insane levels where the Fed is the only buyer. No, I don't like housing bubbles, especially not the bubble on the West Coast. But where do you go to place money in a safe bet when nothing is safe and everyone is going to get creamed?

Even the bond market is going to get creamed. No-one is going to come out of this laughing.

[BuckarooBanzai]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

Krugman is the worst kind of political jackass. I really wish he would crawl up his own asshole and stay there.

[doom&gloom]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

Krugman is the worst kind of political jackass. I really wish he would crawl up his own asshole and stay there.

couldn't have said it better myself.

[jk]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

i think krugman is a pretty smart guy who often has interesting things to say. the problem with keynesianism is that it's never been tried, and it never will be. that's because keynes said that during good times the gov't should run surpluses to pay back the debts run up when applying stimulus during slowdowns. but the political system neither wants to cut spending nor raise taxes, so they're happy to run deficits pretty much all the time, under all conditions. the lack of discipline in the political system thus precludes keynesianism.

in a similar fashion, the lack of moral restraint among private capitalists prevents a free market system from ever being tried. those with money will use it to gain power and manipulate the marketplace. so no free market system can exist in the real world.

[karim0028]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

i think krugman is a pretty smart guy who often has interesting things to say. the problem with keynesianism is that it's never been tried, and it never will be. that's because keynes said that during good times the gov't should run surpluses to pay back the debts run up when applying stimulus during slowdowns. but the political system neither wants to cut spending nor raise taxes, so they're happy to run deficits pretty much all the time, under all conditions. the lack of discipline in the political system thus precludes keynesianism.

in a similar fashion, the lack of moral restraint among private capitalists prevents a free market system from ever being tried. those with money will use it to gain power and manipulate the marketplace. so no free market system can exist in the real world.

very informed post jk; the concept of saving for a rainy day and then spending it when it rains works for individuals, but when it comes to pandering politicians and ever expanding govts, it will never work, bc the temptation to give out goodies that you don't personally pay for before elections or to curry favors is as old as time itself....

[Master Shake]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

Nail meets hammer. Well and succinctly put.

[BK]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

JK or any one - give me a list of 5 unique Economic theories/concepts that are interesting from Krugman? Anyone?

His recent commentary on Gold - and of course he neglects to point out that we would have the Enormous Debt load if we were on a Gold Standard - or some kind of standard - but, Fiat Money has been VERY-GOOD for the University Industry - and his employer Princeton University -
Krugman Commentary regarding a Gold Standard-
" we’d be facing very strong deflationary pressure if we had been on a gold standard? Yes, gold demand is endogenous – it might be lower if you knew that the Fed and the ECB were securely bound by golden fetters. On the other hand, there would be a lot more demand for gold reserves.

[WDCRob]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

If it's a strong economy driving commodity prices why weren't they sky high when the economy was strong pre-collapse?

[jk]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

If it's a strong economy driving commodity prices why weren't they sky high when the economy was strong pre-collapse?

do you recall $140/bbl oil? how about riots around the world because of the high price of food?

[WDCRob]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

do you recall $140/bbl oil? how about riots around the world because of the high price of food?

I do, but I was thinking back a bit further than that. Digging around I found this. I didn't realize how fast the worldwide economy was growing 2006-2008.

But still...

Given that GWP is still well above 2006 levels and roughly on par with 2007 why the sudden decline and then rebound in commodity prices? If the fluctuations aren't being driven by changes in the value of the measuring stick (money) wouldn't you expect to have seen those prices rise like crazy (as they did) then flatten out?

[we_are_toast]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

do you recall $140/bbl oil? how about riots around the world because of the high price of food?

Absolutely!

Which is one of the concerns I have about blaming current price rises in commodities on a falling dollar. In 07/08 there was indeed a very large jump in prices, and it was around the world, and although the dollar did fall, it doesn't appear to be nearly enough to account for the price changes in commodities, referring back to the graph on page one. The same when prices fell, and the same with the current rise in prices. But there does seem to be "some" correlation. So I'll go way out on a limb and guess that the price changes we've seen over the last several years are a combination of supply/demand and currency revaluation.

And to wildly speculate; we know relative currency values are important for demand of imports and exports, so when the dollar drops in value, we import inflation in the form of higher import prices, except for China which keeps the Yuan loosely pegged to the dollar. So when the dollar drops against the rest of the world, so does the Yuan, and so does the price of Chinese exports to the rest of the world. Maybe a drop in the dollar actually creates additional demand from the rest of the world for Chinese products, so we have a boost in commodity prices from dollar depreciation and an increase in world demand for Chinese products?

[jk]

Re: Krugman: Rising commodity prices have nothing to do with Fed money printing

commodity prices will correlate strongly with world gdp, but there's also a faster transient commercial component and then also a speculative component. the spot price will diverge from the futures price, and both diverge from the price in long term contracts made by major producers and consumers of the commodities in question. so world gdp didn't move the way oil dropped from the 140's to the 30's and then quickly bounced back up to the 70's and 80's. for one thing, world gdp just doesn't change that fast, or at least it can't be measured that fast. by its nature, the world gdp number will be a kind of moving average, and even so it is estimated and revised and revised again, while commodity prices are posted with certainty day after day.