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

[flintlock]

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

Yeah, I'm not trying to argue with JK, just need an explanation.

[c1ue]

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

You can't go all the way back to 2001, but generally railroad shares (the same in the seventies) in the US the larger ones like UNP, and different emerging market stocks, even complete markets like India, have tracked gold pretty good, had gold been manipulated, gold had been very low, relative stocks as UNP, and other inflation hedges as well. In 1980 emerging market inflows was at record levels, and it was a huge boom in emerging markets. I think it's because a weak dollar, boost their bonds market's and general lowers interest rates / increase credit growth. http://finance.yahoo.com/echarts?s=G...bol=gld;range= my;compare=unp+^bsesn;indicator=volume;charttype=l ine;crosshair=on;ohlcvalues=0;logscale=off;source= undefined

Hmm interesting you go from saying certain stocks track gold since 2001, to saying maybe some stocks track but not all the way to 2001.

Let's examine your railroad stock analogy: unp vs. gold

UNP 2006 2011.png

Hmm, doesn't look anything like gold. UNP went from over 80 to under 40 - a drop of over 50% in less than 1 year.

Prior to 2006, UNP was basically flat for 4 years.

UNP in 2001 had a high of 60.70 and a low of 43.39, starting price 53.39 and closing price of 57.00

Gold in 2001 started the year a bit above $271, and ended the year a bit above $264. The starting price was the highest closing price and the lowest closing price was about $263.

Since 2001, gold has ended every year higher than it started. UNP has not.

Since 2001, gold has increased over 530%. UNP has increased 162%.

Clearly you are talking, as opposed to citing facts, when you made the statement that there are stocks which have tracked gold's performance.

Unless you care to provide another example that actually illustrates your fatuous statement?

[Chomsky]

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

Hmm interesting you go from saying certain stocks track gold since 2001, to saying maybe some stocks track but not all the way to 2001.

Let's examine your railroad stock analogy: unp vs. gold

[ATTACH=CONFIG]3715[/ATTACH]

Hmm, doesn't look anything like gold. UNP went from over 80 to under 40 - a drop of over 50% in less than 1 year.

Prior to 2006, UNP was basically flat for 4 years.

UNP in 2001 had a high of 60.70 and a low of 43.39, starting price 53.39 and closing price of 57.00

Gold in 2001 started the year a bit above $271, and ended the year a bit above $264. The starting price was the highest closing price and the lowest closing price was about $263.

Since 2001, gold has ended every year higher than it started. UNP has not.

Since 2001, gold has increased over 530%. UNP has increased 162%.

Clearly you are talking, as opposed to citing facts, when you made the statement that there are stocks which have tracked gold's performance.

Unless you care to provide another example that actually illustrates your fatuous statement?

Your attached file is no good and cannot be seen.

[lektrode]

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

The problem have been (please don't be insulted anyone) the baby boomers. For the US and generally the west to be up and coming it's needed that initiative comes from those who are from 20-40 years old as it is in the emerging economies. .....

to some extent, i'd agree with that in the context of private sector enterprise operations.

but the issue in The US is the political or shall i say the _ruling_ class, because thats what they've become (over the past 50years in particular) -that has rigged the game to favor incumbency - and this has led to congress being corrupt to the core, with the issue of 'earmarks' being just the tip of the _huge_ iceberg referred to as 'horsetrading' that goes on in both houses. (on both sides of the aisle)

so what has basically happened is a political aristocracy has developed, to the extent that we have multi-generational political families ie: the kennedy's, the bushes et al, that seem to think they have some sort of "right to rule" (as patsy mink was so famously quoted here in hawaii), essentially based upon bloodline?

writing as a former resident of The Great State of NH, where the legislature is basically a volunteer group of 'citizen legislators' - and by volunteer, i mean they get paid the princely sum of $100/year + mileage for their cars to the capitol, meet for a single 30day session, where they manage to balance the budget, fund the essentials (hard to survive on welfare in NH), have good schools, best roads in the northeast, low crime etc with an economy that is dependant on tourism (no big military bases)

and they do all this with NO INCOME TAX and NO SALES TAX????

i can only contrast this with Hawai`i, where the leg makes 50-60k/year, works for 2 months, mostly distracting the easily distracted electorate with lame issues such as same-sex marriage, while the budget expands to the point of a $770million deficit (biennial), the public school system is failing, the roads are 3rd-world, virtually all of the depts are dysfunctional/overbloated, the public-sector unions and their benefits are untouchable and this all happens with BOTH an income and sales tax, along with the fact that the entire island of o`ahu is essentially the largest military base in the world, which = HUGE influx of federal money, and they cant seem to get the simplest things right, while the welfare class grows by leaps and bounds and the only real growth industry is suing the state??

and THEN we have whats going on in washington, never mind in kalifornia - and is it any wonder why things are the way they are?

could somebody please tell me why we _dont_ have term limits in congress, when every other political office does?

i truly believe that if the signers of the Declaration Of Independence were to come back from the dead, and saw what has happened to America since they left, that they would burn Washington the ground and start over.

other that that, i really dont have any opinion....

[nero3]

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

Hmm interesting you go from saying certain stocks track gold since 2001, to saying maybe some stocks track but not all the way to 2001.

Let's examine your railroad stock analogy: unp vs. gold

[ATTACH=CONFIG]3715[/ATTACH]

Hmm, doesn't look anything like gold. UNP went from over 80 to under 40 - a drop of over 50% in less than 1 year.

Prior to 2006, UNP was basically flat for 4 years.

UNP in 2001 had a high of 60.70 and a low of 43.39, starting price 53.39 and closing price of 57.00

Gold in 2001 started the year a bit above $271, and ended the year a bit above $264. The starting price was the highest closing price and the lowest closing price was about $263.

Since 2001, gold has ended every year higher than it started. UNP has not.

Since 2001, gold has increased over 530%. UNP has increased 162%.

Clearly you are talking, as opposed to citing facts, when you made the statement that there are stocks which have tracked gold's performance.

Unless you care to provide another example that actually illustrates your fatuous statement?

The company Buffett bought had been a much better example. Yes, railroad had a bigger correction (or a better entry point to track the trend in 2009), and it did not start out as gold did from the same cheap level, however the market have found a balance where most of these inflation hedges track eachother, more or less stable since around 2005. If gold goes to 4200 dollar I swear that UNP will go to 270 dollar relatively speaking. It was some of the same in the seventies. In 1971 you had done better to buy gold, but later these things went very much the same way.

[nero3]

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

to some extent, i'd agree with that in the context of private sector enterprise operations.

but the issue in The US is the political or shall i say the _ruling_ class, because thats what they've become (over the past 50years in particular) -that has rigged the game to favor incumbency - and this has led to congress being corrupt to the core, with the issue of 'earmarks' being just the tip of the _huge_ iceberg referred to as 'horsetrading' that goes on in both houses. (on both sides of the aisle)

so what has basically happened is a political aristocracy has developed, to the extent that we have multi-generational political families ie: the kennedy's, the bushes et al, that seem to think they have some sort of "right to rule" (as patsy mink was so famously quoted here in hawaii), essentially based upon bloodline?

writing as a former resident of The Great State of NH, where the legislature is basically a volunteer group of 'citizen legislators' - and by volunteer, i mean they get paid the princely sum of $100/year + mileage for their cars to the capitol, meet for a single 30day session, where they manage to balance the budget, fund the essentials (hard to survive on welfare in NH), have good schools, best roads in the northeast, low crime etc with an economy that is dependant on tourism (no big military bases)

and they do all this with NO INCOME TAX and NO SALES TAX????

i can only contrast this with Hawai`i, where the leg makes 50-60k/year, works for 2 months, mostly distracting the easily distracted electorate with lame issues such as same-sex marriage, while the budget expands to the point of a $770million deficit (biennial), the public school system is failing, the roads are 3rd-world, virtually all of the depts are dysfunctional/overbloated, the public-sector unions and their benefits are untouchable and this all happens with BOTH an income and sales tax, along with the fact that the entire island of o`ahu is essentially the largest military base in the world, which = HUGE influx of federal money, and they cant seem to get the simplest things right, while the welfare class grows by leaps and bounds and the only real growth industry is suing the state??

and THEN we have whats going on in washington, never mind in kalifornia - and is it any wonder why things are the way they are?

could somebody please tell me why we _dont_ have term limits in congress, when every other political office does?

i truly believe that if the signers of the Declaration Of Independence were to come back from the dead, and saw what has happened to America since they left, that they would burn Washington the ground and start over.

other that that, i really dont have any opinion....

I think the mantra now, with the federal reserve is that they should do whatever it takes (as the worst case might be a new hitler, I think this is the motivation of Bernanke when he prints money). While the ones that want hard money really want to take the risk of that, and the whole system imploding. I think enforcing a gold standard onto debt that never should had been made would strangle the economy or even that having hard money without devenloping into some sort of greece because the economy looses so much forward force that it can no longer generate enough to keep the whole system going. In this sense the krugman and his likes are right. However, maybe it had been better for the country if the whole system had went into some form that created a new, fresh base, instead of going this slow and painful route. It's an injustice to savers and all young competent people out there.

[jk]

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

This is what I was getting at as well - but realized that I was in a hole and decided to stop digging.

If this is demand-driven (and not AT ALL related to the Fed - as PK asserts) why didn't we see today's prices when economic activity first hit 2010s level earlier in the 2000s? And if long-view producers (contracts) and investors (options) are seeing something different today than they saw previously at similar demand levels (in 2003? 2004?) what's driving that change in perceptions?

I started pulling together some data to try and put some specifics behind this, but don't much care for being on the other side of an argument with JK (why sit down at the best poker table in the room?), and at the end of the day I suppose I just find Finster's explanation - that what's changed is the ability of producers and investors ability to express their demand via additional dollars - to be more compelling.

i think money printing has a lot to do with prices, and i think that pk deliberately oversimplified things to make a political point. but re demand for commodities, you must also factor in the emergence of demand from the brics and ldc's [which has been growing mightily since 2000 and the recovery from the 1997-8 asian crisis, non?], and then also add globally limited petroleum production. then also add increased domestic petroleum consumption by oil producers -- e.g. the saudis trying to in-shore petrochemical and refining operations, e.g. high levels of subsidized petrol consumption in venezuela and iran. then add stockpiling of industrial commodities by e.g. china, and artificial demand for commodities from speculators. so as much as i think the fed's actions are an important factor in the rise of commodity prices, they are far from the only factor.

[GRG55]

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

yes, and I think it's a welcomed and desired consequence of central planners actions. Higher oil prices puts pressure on exporters (both goods and commodities) to let their currencies rise vs dollar

Commodity exporters cost of production is in their local currency. They have no incentive to let their currencies rise voluntarily. That just raises the real cost of production [compared to the US$ referenced price they receive for that production] and cuts their margins.

[GRG55]

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

We had a 20+ year economic boom. Was oil $140 bbl the whole time?

Great post on how we've never had true Keynesianism by the way.

We had a 20+ year economic boom. Were tech stocks inflated the whole time? Real estate in Tokyo? High rise offices in major global cities? Emerging market debt? Vintage automobiles? Modern art?

Why would anyone expect oil, or any other commodity, to behave any differently? Oil and the other traded commodities are subject to the same animal spirits as any of these other "objects of desire" selected by the speculators...who have enjoyed 20 years of nearly free [ZIRP policy induced] carry trade currency access - first the Yen and now the Dollar.

When oil was running up in the spring of 2008 I made the observation in a couple of posts that, despite the demands from W and Gordon Brown [among others] that OPEC increase production, there didn't appear to be any evidence of any real shortage of oil - no gasoline line-ups, no rationing, the sort of things one might expect.

I'll make the same observation now. There's no evidence of any actual shortages of petroleum [or copper, or iron ore, or...], or some source of demand that is not being met because of a lack of global supply capability. At this moment.

[WDCRob]

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

JK... thanks for the response. It was the unequivocal nature of Krugman that I was taking issue with.

But how many of those initiatives you listed were at root driven by the accumulation of dollars that the various oil producers no longer wanted to hold? That's a serious Q - I'm not sure of the answer. If they weren't aflood in dollars would they have made the same decisions?

[jk]

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

JK... thanks for the response. It was the unequivocal nature of Krugman that I was taking issue with.

But how many of those initiatives you listed were at root driven by the accumulation of dollars that the various oil producers no longer wanted to hold? That's a serious Q - I'm not sure of the answer. If they weren't aflood in dollars would they have made the same decisions?

i'm not sure that question can be answered. e.g. i pointed to increased commodity consumption by the brics and ldc's, but [to oversimplify] their incomes were largely predicated on exports to u.s. consumers who were tapping their home equity. but how far back should we go in our analysis? should greenspan have dropped rates so sharply in 1987? what if the fed hadn't supported the dot com bubble, but had raised margin requirements? we need a multiverse to assess the possibilities.

[c1ue]

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

The company Buffett bought had been a much better example. Yes, railroad had a bigger correction (or a better entry point to track the trend in 2009), and it did not start out as gold did from the same cheap level, however the market have found a balance where most of these inflation hedges track eachother, more or less stable since around 2005. If gold goes to 4200 dollar I swear that UNP will go to 270 dollar relatively speaking. It was some of the same in the seventies. In 1971 you had done better to buy gold, but later these things went very much the same way.

Ok, so in other words your original statement was wrong.

Now instead you give the prediction that UNP will be $270 if gold hits $4200.

Time will tell.

[nero3]

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

Ok, so in other words your original statement was wrong.

Now instead you give the prediction that UNP will be $270 if gold hits $4200.

Time will tell.

No. had this been like in the seventies, the "850" for rails would had happened almost in 1981, far after gold peaked, it seems rails if history repeat would come up to the same 4200 after gold starts to fall. The delay could make timing out of it easier. My opinion is that it was the same forcing driving these different assets. Interest rates, inflation and dollar fears.
Maybe you read to much into it and want it to square. Rails were clearly on a different trend than gold from 1982 and towards 2000. However, I think there was a coupling of these things again happening as inflation took hold, inflation started to go up notably after the Iraq war started. In 1980 you had record inflows into emerging markets. The resilience of gold during the 2009 correction were one of the indicators to me already then, that a bubble were brewing in gold. It's so clear to me, rails have assets, they have pricing power, and that's why it track gold now, atleast UNP does and did during the seventies. Whenever inflation peak it's also possible for the railroad to benefit from lower commodity prices, and outperform gold. Gold wont outperform if inflation peak. UNP did not do this really after 1982, but Buffetts company really went very well, tracking gold, and then when rates and inflation came down, really lifted off.

[c1ue]

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

No. had this been like in the seventies, the "850" for rails would had happened almost in 1981, far after gold peaked, it seems rails if history repeat would come up to the same 4200 after gold starts to fall. The delay could make timing out of it easier. My opinion is that it was the same forcing driving these different assets. Interest rates, inflation and dollar fears.
Maybe you read to much into it and want it to square. Rails were clearly on a different trend than gold from 1982 and towards 2000. However, I think there was a coupling of these things again happening as inflation took hold, inflation started to go up notably after the Iraq war started. In 1980 you had record inflows into emerging markets. The resilience of gold during the 2009 correction were one of the indicators to me already then, that a bubble were brewing in gold. It's so clear to me, rails have assets, they have pricing power, and that's why it track gold now, atleast UNP does and did during the seventies. Whenever inflation peak it's also possible for the railroad to benefit from lower commodity prices, and outperform gold. Gold wont outperform if inflation peak. UNP did not do this really after 1982, but Buffetts company really went very well, tracking gold, and then when rates and inflation came down, really lifted off.

My friend, you continue to spout gobbledygook.

If you cannot provide both clear back tested examples as well as concrete future predictions, then all the words you write are simply entertainment.

You made a statement and failed to back it up.

Now you seem to be trying to obscure the issue by expanding the subject area.

Whatever.

[Camtender]

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

Let me make sure I understand this, almost every single commodity is breaking all time highs..................and this is the best explanation Krugman can come up with, and there are plethora of people on itulip here that believe, the printing of trillions of $$ and the continued monthly $100 billion plus POMO have nothing to do with this???

Are you people dumb?
Didn't Jim Rogers and others say - on video - for more than the past five plus years that the result of printing more dollars to chase fewer non-renewable and renewable natural resources is inflationary on its face?

And home values never go down.................................... sheeple