From QE2 To Economic Titanic, The Global Asset Inflation Surge
By: Andrew McKillop
Nov 05, 2010
Ben Bernanke has cranked the U.S. Fed’s printing presses one more time, with a new injection of US$ 600 billion. Market operators have responded with the only tune they know: bid up all hard asset real resource prices in the Commodities space and, for a while, also talk up their paper cousins in the Equities space, while the US dollar wilts by the hour. Not so far forward, however, this creation of virtual value will hit the iceberg of runaway asset inflation, then vast deflation, as QE2 turns to Titanic.
Examples abound. The nuclear energy asset bubble is launched and powering forward, as reactor building costs are inflated at perhaps 25 percent a year, and uranium prices have risen 26 percent in the 3 months since end-July. Oil and coal prices – if not natural gas prices which are still held back by the unsure menace of shale and frac gas resource development – are also powering forward, but with strong competition from the asset inflation now operating in nearly all and any food and soft commodities. Rubber prices, for example, are at a 30-year high. While the pretence can be maintained that commodities inflation is good news for equities, they also can be talked up, but only for a while.