| Economist Ben Stein wrote for the New York Times 11 May 2008 explaining rising prices in relation to the depreciation of the "dollar":
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...the price we pay is denominated in dollars, and as the dollar falls, the price in dollars rises. ...But there is another hugely important factor now in world energy markets: the pricing of energy as a speculative item. Traders can and do buy vast amounts of energy futures. Right now, there is a worldwide mania to invest in them. In this situation, when investors and traders are pouring buckets of money into thimbles of energy quanta, to use a phrase from my pal Tobias M. Levkovich, chief United States equity strategist at Citigroup, the price is bid higher and higher. And, as the price goes up, demand does not fall. It rises, because investors and traders think that it will keep rising and they will make money on it in the future. (Oil, gasoline and natural gas can be stored indefinitely.) It's like the bubble in Miami Beach condominiums. As the price of them soared, traders did not stay away. Instead, they kept buying, anticipating more or less endless gains. ...And now the big boys have been joined by you and me. Little folks like us can buy our very own energy baskets of exchange-traded funds and the like, and are doing so in big numbers. Now, the alert reader will notice two truths at this point: One, bubbles always end, and almost always end badly. So will this one. There is always some supposed reason that "this time is different," but it never is. Second, the fact that small players are getting into the game is almost always a sign that the end of the bubble is near. This will be good news for us drivers, homeowners and swimmers. But it will be bad news for those who thought that buying baskets of commodities would make them rich.
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The more "worthless" paper government pumps into the economy, the more the speculative bubble will inflate, the speculators purchasing grain futures, metals, and etc., so the "dollar" "price" of these items continues to rise. They know that the "dollar" is not worth investing in, and they are hedging their bets against it. Those with the know-how will benefit the most, while the little guy takes it in the ass.
BOHICA |