Commentary of Ron Muhlenkamp: The pain continues. The focus has shifted somewhat from financial concerns to the price of commodities, particularly energy and food.
One reason this is important is that increasing prices for food and energy affect nearly everyone worldwide, including people in the emerging countries including (and maybe especially) China and India which have provided strong economic growth over the past number of years. This increases the odds for a worldwide slowdown/recession which could be longer and deeper than one in the United States, if the U.S. was going through this recession alone.
Parts of this picture we have seen before. In 1973-1974, the price of crude oil tripled as did the prices of wheat, corn, soybeans and a number of other commodities. The increased grain prices resulted in an increase in production which caused their subsequent prices to fall by a third within three years, their prices then stayed in that range for 30 years. The increased price of crude oil drove efforts to improve energy efficiency. In the U.S. and other countries, we now use half the energy per dollar of GDP that was used in 1970! We expect much of this pattern to occur again – but it takes time.
Read the complete commentary
One reason this is important is that increasing prices for food and energy affect nearly everyone worldwide, including people in the emerging countries including (and maybe especially) China and India which have provided strong economic growth over the past number of years. This increases the odds for a worldwide slowdown/recession which could be longer and deeper than one in the United States, if the U.S. was going through this recession alone.
Parts of this picture we have seen before. In 1973-1974, the price of crude oil tripled as did the prices of wheat, corn, soybeans and a number of other commodities. The increased grain prices resulted in an increase in production which caused their subsequent prices to fall by a third within three years, their prices then stayed in that range for 30 years. The increased price of crude oil drove efforts to improve energy efficiency. In the U.S. and other countries, we now use half the energy per dollar of GDP that was used in 1970! We expect much of this pattern to occur again – but it takes time.
Read the complete commentary
