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Thu Nov 25, 2021, 09:17 PM

Here is the explanation for inflation in Canada. It is output gap and commodity prices and should

resolve itself in a few months.



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Reply Here is the explanation for inflation in Canada. It is output gap and commodity prices and should (Original post)
applegrove Nov 25 OP
Midnight Writer Nov 25 #1
applegrove Nov 25 #2
paleotn Nov 25 #3

Response to applegrove (Original post)

Thu Nov 25, 2021, 09:32 PM

1. Looks like they are predicting a drop in commodity prices. I wonder why?

What is happening in commodity markets today that won't continue? I see Exxon doubled its stock price in the last year. Why wouldn't the producers and investors in the market want to keep prices rising?

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Response to Midnight Writer (Reply #1)

Thu Nov 25, 2021, 09:41 PM

2. Commodity prices went up during covid because there were lockdowns everywhere. Less was mined

Last edited Thu Nov 25, 2021, 10:28 PM - Edit history (2)

or produced. If Covid is shut down itself with vaccines, commodity prices will fall. Not all commodities have an OPEC to keep prices high. When mines and other commodities are open for a year, the markets will adjust to normal. If this new South African/Botswana covid strain shuts the world down again, we are ****ed.

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Response to Midnight Writer (Reply #1)

Thu Nov 25, 2021, 10:06 PM

3. Simple economics and human nature....

Higher than "normal" prices aren't good for anyone since they dampen demand, hurting commodity producers in the long run. OPEC and other oil producers knows this as well as anyone. That's why they attempt to keep global oil prices at a "sweet spot" where demand and supply are in balance. They're making money, but not destroying demand in the process. The last thing they want is all of us going out and buying Priuses and using far less oil, though that wouldn't necessarily be a bad thing. Add nimble, US frackers to the equation and oil prices, particularly in the US, may come down quickly in coming months.

For other products, once capacity that was idled during the height of the pandemic in 2020 is fully back on line, supplies will increase to meet demand. Often times, supply overshoots demand and prices decline relatively rapidly.

Price spikes like we're seeing aren't necessarily a bad thing. They're the creaks and groans of the global economy returning to normal. DC put tons of money in American's pockets during the pandemic and they're spending it. Just more on stuff and less on services than expected, driving shortages. A slight miscalculation, but still, we're in a hell of a lot better spot than 2020 because of it.

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