Agreed.
You may recall I caught a lot of grief here for stating that the commodity price spike of 2007 to 2008 was driven by speculators, namely sovereign wealth funds abroad and investment banks like Goldman Sach's.
While oil played a large part, other commodities like copper gained 300% in price.
We know nearly all economic models
assume people will pay their bills. What we fail to adequately plan for is people not paying their bills. This includes governments.
The point being, at a $30 a barrel extraction cost there is plenty of room to tax energy, spend on infrastructure and supplement payouts to non producers. At $80 to $90 the margins for society are slim and at $180, the system begins to break down; immediate need for commodity goods outweighs fears of foreclosure on the family home.
This is a pattern history has watched as many societies have grown until they reached a decline in commodity supplies, often that being a decline in the quality of farm land and water. The pattern becomes a large income disparity and a growing reliance on government until that becomes insufficient and the masses take to the streets.
Consider this chart:
What you see is that that rising costs in some goods were offset in cost by declining prices until rising commodity prices spiked. That spike popped the bubble because people stopped paying their bills.
IMHO there is a role for a very active Department of Justice and Federal Trade Commission.* As global populations push the limits of resource sustainability we face tighter margins. Undisciplined trading of commodities has led to global crisis and will again.
We in the United States were well insulated. At the medical university adjacent to the orphanage my family runs in the philippines the staff and teachers saw a fire on campus and went to investigate. They found Medical Students trying to boil and eat sticks and foliage due to the extreme rise in rice prices. We used our supplies to feed the students (and we've long enjoyed a symbiotic relationship by which their students provide medical care to our kids). Point being, when orphans are feeding Doctors there is a clear market disruption.
Unions are a stabilizing force at the bottom of the market and should be highly valued by workers, governments and even the market. I am thankful for ALPA's work with Delta Air Lines to keep me employed when it would have been much easier to furlough in 2008. Instead of selling our house to pay bills, we were able to take advantage of the market's "half price" sale. Thus, we were keeping several bankers, real estate agents, crews of workers and people in the taxing agencies earning as well. Yes, the stock market took it in the shorts and the Company took a $500,000,000.00+ loss. But
thousands of people reliant on Delta kept paying their bills.
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* Legal carve outs for Health Care Maintenance Organizations and even permitted monopolization of data (Comcast, in a nutshell) should not exist.