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Did The Bottom Just Fall Out Of Commodities?
Global growth expectations... we have a problem. With all eyes focused on BABA, Treasury yields, and Russell 2000 death-crosses, the old equally-weighted CRB commodity index has broken down through support to 4-year lows this morning...
Commodities have slipped notably since confirming their own death cross in August.
Chart: Bloomberg
h/t Brad Wishak at NewEdge
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Real debt explodes when commodity prices fall.
This hurts debtors.
When a debtor has a printing press and the legal authority to print, guess what action will be taken?
QE will be back. The question is whether there will be a broad abandonment of devalued currencies when the next round of QE begins.
Every now and then a very notable and important event occurs, sometimes it slips by without even being noticed. For months the major world currencies have traded in a narrow range as if held in limbo by some great force. This has allowed people to think we were on sound footing as central banks across the world continued to print and pump out money chasing the "ever elusive growth" that always appears to be just around the corner.
Weak demand for goods and most of this money flowing into intangible investments inflation has not been a major problem, but the seeds for its future growth have been planted everywhere. John Maynard Keynes said By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. While there are not many Bond Vigilantes there are a slew of Currency Vigilantes and they are ready to make their presence known. Weakness in the value of the Yen, Pound, and Euro must not go unnoticed. More on why this may be a signal that currencies are about to get wild in the article below.
http://brucewilds.blogspot.com/2014/09/caution-alert-currencies-may-get-...
Bagholders. Global economy at a standstill.
The most striking decline in commodities has come in the grains. No doubt some of that is due to favorable growing conditions in the current crop, but my guess is that the Russian counter-sanctions had a lot to do with it. Suddenly there is a lot of grain in the US looking for new customers. Best of all, rice has dropped from 15 to 12 dollars the hundredweght, so more of my favorite breakfast cereal - rice crispies - are being made. Tough on Asian and tropical rice growers, though.