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| By cosmici FINANCIAL TIMES: Peter Bernstein's article about the break-out in gold prices ("The commodities binge will lead to indigestion", April 15/16) correctly warns of a rising price trend in commodities. But he does not go far enough. He cites "gloom-mongers" who fear the "binge" is a sign that "any day now the dollar will go down the tube". Surely that is what has already happened! The dollar is a variable, while gold is the next best thing to a constant. Commodities form merely the vanguard of a general break-out in the prices of everything... [*] The rich have been heavily invested commodities since 2004, and have realized a 50-100% gain against the dollar (far more if it was leveraged through futures). In other words the dollar has declined by 50%. A year ago it was the cover story in Newsweek [*]. Economist Allan Sloan said the dollar slide would stop there [*], but that was wishful thinking. The fundamentals weren't there. The US economy is in terrible shape and is being kept alive only by the low prices of the Asian exporting countries. BushCo in its shortsighted stupidity wants China to revalue its currency, in hopes of stimulating US exports. In fact, that would create a demand crisis in the US as the low price, low wage WalMart-style economy would have its legs knocked out from under it. China has refused possibly fearing that and certainly fearing loss of market share. But market driven commodities are not under the same constraints, and as such they provide, as the writer indicates, a leading indicator. That indicator says "Watch out!" | | | | |
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