UN endorses more price controls on commodities
Reports the Bloomberg,
Commodity markets need international oversight, more transparency and intervention to deflate bubbles because increasing speculation means prices are no longer driven by supply and demand, the United Nations said.
Increased investment in commodity markets has encouraged “herding behavior” and creates bubbles, the UN’s Conference on Trade and Development said in a report published today. Anticipation of the global economic recovery played a “disproportionate role” in higher commodity prices, it said.
“Prices can move far from levels justified by the fundamentals for extended periods, leading to an increasing risk of price bubbles,” the UN said in the report. “Due to these distortions, commodity prices do not always provide correct signals about the relative scarcity of commodities.”
By how exactly does the UN determine “prices are no longer driven by supply and demand”? Their math models?
It’s an irony because earlier they had been warning about a US dollar collapse
From the IBTimes FX
Rob Vos, a senior UN economist involved with the report, said if emerging markets "massively start selling off dollars, then you can have this risk of a slide in the dollar."
Are they assuming that “selling off dollars” and “prices are no longer driven by supply and demand” are not at all connected?
Put differently, that there is absolutely no connection between debasing one’s currency and rising prices?
Maybe Zimbabwe did not experience a socio-economic depression from hyperinflation (2004-2009).
Instead Zimbabwe could have suffered from the herding effects of speculators. Speculators cratered the Zimbabwe dollar and caused consumer prices to double every day
Such is UN's prism of economics.
In the real world, rising commodity prices in response to government’s continued debasing of a currency is a symptom known as the “Flight to Real Values”.
From Mises.org
The frantic rush to spend all monetary savings and other available cash, buying goods, whether needed or not, in order to avoid holding, even for a short time, any rapidly depreciating monetary units. This occurs at that point in the development of inflation when the public is convinced that prices will continue to rise endlessly and at an accelerated pace. The flight into goods or real values is also known as a "Crack-up boom" (q.v.) and marks the complete breakdown of a monetary system.
The UN can only pretend. But they will not succeed in controlling prices if they do not treat the root of the problem—government’s inflationism.
As Ludwig von Mises warned in Planning for Freedom
those engaged in futile and hopeless attempts to fight the inevitable consequences of inflation-the rise in prices-are masquerading their endeavors as a fight against inflation. While fighting the symptoms, they pretend to fight the root causes of the evil. And because they do not comprehend the causal relation-between the increase in money in circulation and credit expansion on the one hand and the rise in prices on the other, they practically make things worse.
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