Commodity Speculators and Inflation

Let's think this through.

Why is gold worth $900 today when it was only worth $300 just 7 years ago.

Was gold really worth $850 in 1979 and then only $300 in 1982?

Is crude oil really worth $140 per barrel today when it was trading for $20 per barrel less than 10 years ago?

Why were the analysts incorrect a year ago when they predicted that oil would average about $70 per barrel this year?

Real estate prices changed dramatically over the past several years. Should the exact same piece of real estate, with no improvements, be worth 2 times or 3 or even more than it was several years ago?

Well, the answers are pretty simple.

As a people, we waste a lot of time and energy speculating, gambling, etc. We call it price discovery and entertainment, respectively.

First of all the dollar has depreciated by 100% (depending upon the currency in question and how you define percentages) over the past 8 years.

Second, the self-fulfilling prophecies of mass psychology contribute to the extraordinary movements in prices and production.

When self interests motivate price discovery, energy and production, volatility in price, energy and production are magnified in the directions of those movements.

It doesn't seem too unusual to expect what has befallen us.

The question now is where the next movements of self-interest, energy and production will take place?

Well, with interest rates low, borrowers will be able to reignite the acceleration of credit creation, thus causing prices to increase in about everything again, causing an increase in energy and production. It should be good for the economy. It should initially bring prices down.

Hopefully the central bankers will be able to successfully manipulate our psychology, so that we will mitigate the inflationary consequences of speculation and self-interest.

If we as a world population will put our focus, energy and production on things like education, healthcare, work and wellness, good things will happen, and speculation and inflation will moderate.