Inflation is rising, commodities go vertical
The whole financial world is watching how the current inflation is rising at a fast pace. While some asset prices such as food, real estate and used cars are in upward trend, the commodities have gone vertical and expected to stay this way for a long period of time now.
Causes of the Current Inflationary Environment
One of the causes is the amount of the printed money by the Fed in the US. The Federal Reserve (Fed) has printed more 3 trillion USD between March and June 2020. But the US Federal Government has printed upwards of 5 trillion USD via its stimulus programs.
Also, President Administration has plans on spending another 2.25 trillion USD on infrastructure, 2 trillion USD on climate change, 1.8 trillion USD for American Families Plan and more. We can include other major central banks, and the amount of printed money would most likely double or triple.
Massive Rally in all Commodities
There are some crazy changes in the commodiries market too. On Monday, iron ore futures surged 10% to a record high, steel prices rose 6%, and copper prices touched record highs. Silver and gold are starting to pick up as well, with gold rising to 1,840 USD and silver attacking the 28 USD level. Oil went up rising from 0-10 USD to the current 65 USD, which is hundreds of percent over the last year.
Each month main equity benchmarks are rising to new highs that we haven’t seen before, and most of the cryptocurrencies are off the charts. Many market specialists are calling this the biggest bubble of all time. Every bubble has a speculative mania part and a leverage component: everyone thinks that gains are inevitable. It would be irrational not to borrow money and leverage to extremes to maximize the guaranteed profits.
Is this Going to Stop?
Doesn’t seem like it. With the current monetary policies that the Fed and other central banks would refise to quit, fueling the bubbles to even greater extremes.
Commodities will continue to spiral higher, sending inflation further through the roof, effectively crushing the middle and low-income class. Ordinary people will be among the most significant losers during high inflation periods – all groceries, utilities, services, cars, products, day-to-day stuff will become more expensive, while wages won’t react as fast.