Tuesday, December 28, 2010

Krugman: what are the implications of the recent rise in commodity prices?

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.


Carol said...

There has to be a limit I'm sure.

Amber said...

Very interesting. I had not thought of this before, but it seems very likely.

Christie said...

The US government really needs to understand their position in the world, and do their best to uplift themselves and the rest of the world.