The Next Bubble

October 29, 2008 at 1:12 pm  ·  Category: Commodities, Federal Reserve, Geopolitics, Macro Economics

With the Fed slashing the funds rate to 1% today, it’s worth remembering what happened the last time they did this: We got the most massive housing bubble in the history of mankind. 

Well, today, in the midst of this crisis, where the only concern is the present moment, the seeds for the next bubble are being laid.  The adjusted monetary base has increased by 35% in just the last 6 weeks: Adjusted Monetary Base Chart.

My prediction is for a super bubble in commodities.  With the emerging world industrializing, the squeeze on the fixed amount of materials in the earth is poised to intensify over the next 15-20 years.  Combine that with the loosest, most reckless, monetary policy in history and I think the stage is set for $500 oil, $15 copper and $4000 gold.

This kind of thing is not only going to be an economic but a geopolitical problem.  I’m talking about wars between countries for the control of natural resources.

The corresponding destruction of the monetary unit and resulting hyperinflation will also create all kinds of problems for economic exchange and the whole specialized, division of labor structure of the global economy.

Today, the seeds are being laid for an economic apocalypse.

UPDATE (Wed 11/5, 9:30am PST): Kirk linked to this post in one of his linkfests last Thursday.  The headings is: “The seeds are being laid for an economic apocalypse”.

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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