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Our
Finite World
by Paul Krugman
Oil is back above $90 a barrel.
Copper and cotton have hit record highs.
Wheat and corn prices are way up. Over all, world commodity prices
have risen by a quarter in the past six months.
So what’s the meaning of this surge?
Is it speculation run amok? Is it the result of excessive money
creation,
a harbinger of runaway inflation just around the corner? No and no.
What the commodity markets are telling us is that we’re living in a
finite world,
in which the rapid growth of emerging economies is placing pressure on
limited
supplies of raw materials, pushing up their prices. And America is, for
the
most part, just a bystander in this story.
Some background: The last time the prices of oil and other commodities
were this high,
two and a half years ago, many commentators dismissed the price spike
as an aberration
driven by speculators. And they claimed vindication when commodity
prices plunged in
the second half of 2008.
But that price collapse coincided with a severe global recession, which
led to a
sharp fall in demand for raw materials. The big test would come when
the world
economy recovered. Would raw materials once again become expensive?
Well, it still feels like a recession in America. But thanks to growth
in developing nations,
world industrial production recently passed its previous peak — and,
sure enough,
commodity prices are surging again.
...and he didn't even mention gold prices.
So why is America still in a recession?
Why are companies full of cash not hiring?