We about to relearn a lesson: manufacturing debt instruments in anything but the very short run produces no net new economic growth, and because of debt service, actually retards it. From MN Gordon at economicprism.com:
The prices of certain commodities are down. But not down enough to proclaim price inflation dead.
Lumber futures, for example, declined more than 40 percent in June. This marked the largest price decline for lumber since the 1970s. But after spiking from about $495 per thousand board feet in October 2020 to over $1,423 in April 2021, lumber’s current price of $718 is still almost double its 30 year average.
Futures for lean hogs have also pulled back of late. After reaching an interim high of 121.95 cents per pound on June 9, they’re currently priced at 110.10. Still, even with this recent decline, lean hogs have increased over 57 percent since the beginning of 2021.
Just one year ago, raw sugar futures were priced at 11.76 cents per pound. In February, they hit a four year high of 18.49. At the time of this writing, raw sugar futures are priced at 17.45. Apparently, some of this price increase is attributed to concerns about dry weather impacting Brazilian sugarcane output. Should you sweeten your portfolio?
What’s going on with these wild price swings? Has demand relented? Has supply increased? Have broken supply chain links been reconnected? Should we blame it on the weather?
Maybe so. And maybe prices will fall back in line with pre-pandemic levels. But probably not…
The economy, thanks to the extreme intervention of central planners, is far different than it was before the pandemic. Government lockdowns made an abrupt mess of things – disrupting production, supply chains, and capital flows.
However, the solution to the lockdowns – free money – has created a lasting disaster that will never, ever go away. Here’s why…