Friday, May 06, 2011

Pop goes the bubble?

I've been writing a lot over recent months about how the heralded Latin American economic growth is based largely on high commodity prices, and wondering about the long-term effects.  So this article in the New York Times caught my eye:

Commodities prices fell sharply on Thursday, led by the steepest drop in oil prices since the fall of 2008.
Investors dumped commodities like silver and coffee and sugar that had seen a vast — and some said worrying — build up in prices within the last year on expectations of strong global demand.

And:

“You’re in a situation where a lot of these markets have pushed to all-time highs and it’s at a point where it became very unstable and that’s where you started to topple,” said Dax L. Wedemeyer, a broker analyst with US Commodities, a brokerage firm West Des Moines, Iowa.

So we'll wait and see what the growth numbers look like later this year.

4 comments:

Tambopaxi 9:37 AM  

Well, perhaps on the bright side (possibly), food prices will drop as well...

Vicente Duque 1:07 PM  

Very interesting article.

Only solution : "Saving for a rainy day". ( spending discipline )

There has to be a way that ( at least ) some of these Latin countries overcome poverty, backwardness, Injustice, corruption, inefficiency, ineffectiveness.

I am not an economist or expert but I am really shocked and disgusted by the anti-Keynes philosophy of these times.

Keynesian economics was something very close to the heart of my teachers ( also Franklin Roosevelt ) ....

I argued with some very close Canadian friends of mine. I defended FDR and they defended Ronald Reagan. It was 1981-1982.

We are now in round 300 of that fight. I am still a rendered fan of Keynes and FDR....

Spending discipline and when things go wrong : John Maynard Keynes.....

I said this because if the USA falls then it falls causing great damage on Latin America.

U. S. Prosperity is good for all of us in the World and particularly in the Western Hemisphere.

Vicente

JHD 3:07 PM  

I may be mistaken, but as bad as this is, it also means that the value of currency is slipping in the region against the dollar, http://www.reuters.com/article/2011/05/05/markets-latam-forex-idUSN0519438720110505

That could (I don't say will) help bolster the industrial sector as the price of raw goods fall and the weaker currency encourages export of industrial products - an area that needs to see growth.

Randy Paul 7:01 PM  

JHD's point is important. Brazil has been pushing for a stronger dollar to boost their trade surplus.

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