Krugman: The rise in commodity prices are a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding. This won’t bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.
SHOOT: To some extent I agree with Krugman. He seems to think the USA are bystanders to current economic moves, notably the Dollars value dive. Really? And the USA doesn't care about emerging economies [er...like China, really?] He's on the money that we are starting to face the consequences of too many people living in a world with just so many resources, and not quite enough energy to go around. Put another way, there probably isn't enough cheap energy to fuel 1/7th of the world's population driving cars [that's 1 billion vehicles]. In other words, not everyone in the world is going to be able to afford a car, a suburban house or the dream of middle class living.
Interestingly, Krugman points out that current prices were last at this level 2.5 years ago. I recently spoke to an energy economist who said that when oil prices reach 3 year highs, expect a recession to kick in. We're far into that territory now, however way you want to spin it.
Read the rest of his article here.