I see your point.I wasnt clear about supply being flexible as well….as supply shifts to the left,I’m guessing unemployment rises and thus is very strong demand destruction. I think we’re seeing this right now.
If you look at the production capacity created by the Chinese in the last 6 years, it’s through the roof. And they are nearly the lowest cost producer on the planet. But there’s also Eastern Europe’s build-up as well as emerging areas of Asia. I’d say that equals a global level of supply/capacity that’s unequaled in history.
If one believes Roubini’s analysis that a global recession is at hand, then I have trouble seeing how this cannot lower demand in a world of incredible supply. I think this is why I’ve heard Both Jim Rogers and Marc Faber talking about agricultural commodities lately. Lots of people on the planet these days and food is not very discressionary. So perhaps we could see inflation hitting food. Or maybe it already has?
I think from an Austrian point of view, we are in a deflationary cycle or just starting one. But it’s hardly my area of expertise.
