Wednesday, September 10, 2008

Coyote Physics as an election strategy

The reason Stephen Harper is rushing us to the polls with such unseemly haste? The commodity bubble just popped and he wanted to call an election and get it over with in the blissful moment just after the Canadian economy has run off the edge of the cliff and is hanging in space legs pumping, before gravity claims its due and the pain begins.

UPDATE September 19: Sweet! Jon Stewart references the Wile E. Coyote theory of economics!

Hannity: Is Senator Obama then using what happened on Wall Street this week? Is he using it for political gain? Is there a danger of a presidential candidate is saying to the world that America’s situation of economic crisis is the worst that we’ve seen in decades — which was words that he was using yesterday — is there a danger in terms of the world hearing that?

Stewart: “I mean, Sarah, answer this for me: Shouldn’t we be lying to the world? For instance, what if we told the world the stock market was like golf scores, lower numbers are better. Apparently for Sean Hannity, the greatest in an economic free fall is acknowledging it. It’s the Wile E. Coyote theory applied to economics.”

1 comment:

Lord of Wealth said...

I would catagorize the current commodity action as a severe correction in a commodity bull market not a bubble.

Today's journalist don't know squat about economics and any great price increase is called a bubble when not all are.

A bubble would be a market that has sufficient or excess product yet a mania causes the prices to increase despite there being no demand/supply conflict. In housing, in tech stocks like nortel, in the industrial expansion and stock boom of the late 20s there was a clasical bubble. In each of these cases there was ample supply of each product but speculation caused prices to spike to unrealistic realms.

In today's commodity boom, there are physical limitations of food grains, energy, strategic minerals like silver, Plat, rare earth metals, tungston, Moly. Yes there has been a staggering correction brought on by a U.S. slowdown and manipulation by naked short sellers but the supply side of most of these commodities have not made any significant improvement and in many cases recent inflation in producting costs have not made these industries any more profitable meaning supply has no reason to increase.

Nothing goes staight up and this is still just a correction and consolidation of the market and a reflection of the credit freeze up.
As long as supply does not grow forcing prices down this correction is just part of the normal cyclical nature of a classical commodities boom. This was only wave 2, (commodity booms historically last longer than this one has and have more waves), the next wave might spark a mania, insane profits, more production and a bubble but right now there is no rational to label it as such. With our increased gluttonly and the needs of 3 billion wannabe middle class Asians coming to market coupled with a finite earth, shortages may develope that can never be met.

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