Tuesday, February 18, 2014

Economy: Deflation? What Deflation?

(Drivebycuriosity) - There is much talk about deflation these days. Many pundits lament that the inflation rate in the US and Europe  is too low and that the global economy could fall into a deflation spiral (sharp falling prices) which could cause a severe recession. But the commodity prices, an important component of the general inflation rate, are already jumping. Oil, natural gas, coffee, soy beans, sugar and other commodities are rallying, reports Bloomberg (bloomberg).

It looks like that hedge funds and other speculators are pumping a lot of money into the commodity sector, maybe as a response to the global economic upswing. What a luck that the US Federal Reserve started the tapering. The gradual downsizing of the massive monetary stimulus program QE3 didn´t start to early as the refreshed commodity speculation shows. The taper could counter an inflation spiral caused by massive speculative purchases of commodities. Fingers crossed.

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