Tuesday, December 13, 2005

Inflation Roars: Rubber Worker's Unrest In Asia Raises Rubber Prices


By Elaine Meinel Supkis

Muslims fighting Buddhists in Thailand shuts down rubber plantations causing the world price of rubber to shoot up. As the pain of inflation is taken out on the backs of workers, unrest and fury rises even in America, there is growing unease and anger.

From the International Hearld Tribune:
Rubber prices may rise to the highest in 21 years as violence in Thailand prevents the world's biggest supplier from meeting Chinese demand.
Plantation owners in Thailand, which supplies 38 percent of the world's rubber, are being hampered by fighting between Muslim activists and the police in the southern part of the country. Production, already hampered by heavy rains, may fall further because a curfew and fear of attacks are reducing the time workers spend tapping rubber trees.
Ok, timely story for me! As my blog has detailed, the Amazon is having one of those pesky droughts which seem to be alternating with torrential rains. Of course, the rain is falling in South East Asia this year so they have way too much and the Amazon, way too little. This is one of the many side effects of global warming/forest cutting in jungles dynamics.
Chinese automakers are increasing output by about 15 percent and their demand for rubber is rising. Rubber supplies have plunged 78 percent this year in warehouses monitored by the Shanghai Stock Exchange.
Commodities from copper to crude oil are surging because of orders from China. Prices for copper, oil and iron ore rose to records this year, helping lift the Total Return index of the Goldman Sachs Commodity index 22 percent in the first 11 months, compared with a 3 percent gain by the Standard and Poor's 500 index.
Geeze. I saw this happen before! The price of oil shot up and then the price of all other raw materials shot up, too. Because of timelag effects, when massive inflation rears its ugly head, the effects at first are contrary, namely, the price of consumer goods which are not time-dependent like health care or food, tend to fall rapidly as sellers desperately try to eliminate excess capacity and inventory.

So the inflation which we know will show up with a vengence, doesn't at first. This always gives the professional economists and pundits cause to bray that high energy costs don't cause inflation. Always, when energy costs escalate rapidly, gold suddenly takes off in value because all consumer nations respond by encouraging the printing of dollar bills so the energy price hikes can become meaningless. The holder of these increasingly worthless, vis a vis oil, dollars then retaliate by buying gold to lock in value.

One time, when the Iran/Iraq war was raging, the price of gold hit $850 per once. Inflation then began to rage in the USA and interest rates shot up to over 11%.

Well, the Fed just decided to stop publishing the M3 statistics which tracks how many dollars the Fed prints up. For obvious reasons. They feel they can fool someone this way. Who?

The American consumer.

Great wars have been waged over commodities like oil as we see clearly today in Iraq. But great battles have been fought over rubber, too. And vast labor struggles. Rubber gold rushes have been just as amazing as gold rushes, huge cities suddenly springing upriver in jungles. During WWII, we had to evict the Japanese from Asian rubber plantations as quickly as possible to cripple not only the Japanese but the German war efforts.

When rubber, copper and gold shoot up in price alongside oil we will see a lot of inflation. Once the big manufacturers cut down on their own inventory, to restore the profit margin, they will begin to hike prices even if this means fewer customers. After all, it is the profit margin that matters, not how many you sell. And market share, but only if you make a profit. The American auto makers ate up their profits this year trying to unload stock. Now their credit rating stinks, General Motors just had theirs degraded yet again this week!

And the biggest customer for loans, the US Government, is raising interest rates yet again and simulatneously announcing they have killed inflation and so won't need anymore raises.

Gads. In a rat's ass! Talk about liars! They are my age or older, these clowns. They should be able to remember the past but I bet, they cannot. For they are delusional and deliberately so.

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