Hi,
Yes, I think this is a good debate. Nice to see people are actually interested in this stuff.
Its easy for people to get emotional and blame greedy oil execs, India or China or the peak oil theory or whatever as the primary responsible party. Those all all valid arguments, however I will never agree with them.
As I've stated before, I believe this has very little to do with geology and far more to do with liquidity and monetary policy and a healty mix of human psychology.
Anyway, for what its worth, one of the best indicators for the last 3500 years regarding disturbances of commodities prices is the price of gold. If gold is below 300 ounce (USD) things start going astray. Above 400 ounce to 450 ounce things again start reaching the weird on the other end of the scale.
If below 300 ounce we will find a rapid tightening up of commodities. This happened in the decade of 1990. Oil plunged to around 11 USD, farmers were going bankrupt, people and politicians blamed the large food processors and such as a deflationary track was put into effect.
What did these investors do? Where did they put their money? They put their money into a new and growing industry called Tech/Dot Com. this started the tech bubble. It can be described as a process of creative destruction. Someone wins, someone looses. Financial extinction is the way many have and will continue to meet reality. This is how the free markets work in the real world. Believe me! It gets very messy and is hardly ever representative of smooth consistent quarterly growth.
Now take gold 400 ounce and above and we start experiencing commodities inflation. This is obviously where we are today. I don't see why this is so difficult to understand. Precious metals, International trade and shipping rates start to increase. We start experiencing a slow down in general economic activity. What do investors do at this juncture? Do they run and hide their money under the mattress? Nope, they start speculating because inflation fosters and procreates an environment of speculation.
The Central Bank has screwed up more times than I can remember. You would be hard pressed to find a real world, non-governmental economist or any large business organization defending the Feds. The Feds primary duty is to maintain the integrity of the currency and avoid panic. They often fall short.
Like I said before, I believe we need rates to slowly reverse over the long term, spread over several years. You will be seeing more economist discussing exactly this in the next few months if things don't improve. The Fed historically is realiable in one thing, this is... they always arrive late and fall short of tackling economic upsets before they spread into other sectors of the economy.
Of course the best sistuation in my opinion would be for the Fed to stop manipulating interest rates, however this won't happen anytime soon. The printing press is at full throttle and this leads to higher prices for everything including OIL. The people who run the government in America or governments abroad cannot face the temptation to create money.
Lastly, I believe but I'm not sure the USD was allowed to be redeemable into gold back in the 1930's. After that time, the presses have been at the mercy of the politicians. Inflation and the threat of inflation is something we can deal with now!!! We cannot deal with a "peak oil" situation. That is out of our control. We can start improving the situation today by having sound monetary policy! If the CB cannot correct the problem then surely things will get worse.
I would like to acknowledge all the people who thought they were intituled to a home even if they could not afford the purchase, for it is for those geniuses that got us to this situation.
EAHINC