2/25/08 Global Asset and Commodity Bubble

The global asset bubble in commodities, food and energy does seem new and frightening in the post war II world. the only way to pop the bubble would seem to be a severe world econ deceleration in growth. eventually the energy markets will put an unbearable squeeze on profits, predictably hitting first those industializing asian countries which require the highest proportion of energy inputs. the lower us dollar is squeezing asia through high energy prices. the only long-term way out is the development of sustainable alternative sources. how long will that take? the bubble in food and energy will require a new approach to the dollar as the world reserve currency. slowly and painfully the world will have to wean itself from the debt engine of the us.
The boom in commodities and resource prices may be indicative of a looming crisis of profitability, as speculation focuses on the purchase of fixed stores of value rather than upon investments in their productive manufacture. excess liquidity is likely as much the source of inflating commodity prices as industrial demand. the rise in commodity prices caused by an increase in world demand receives the jolt which has resulted in a commodity bubble from the excess liquidity stemming from the loose dollar regime of the us. this inflation portends a busting of bottom-line profits world-wide. a much faster and deeper consolidation and concentration of profitable manufacturing capital.
the fed's actions in lowering the fed funds rate is generalizing the pain of america's economic problems throughout the world. pushing up inflation world-wide and squeezing profits and growth rates.