Worldwide Commodity Boom Or Bubble?
1. It costs the US Mint two pennies worth of metal to make one penny.
2. One Indian rupee coin is worth Rs. 35 when melted and turned into razor blades.
3. Gold and oil prices hit new highs in the world market in 2007.
4. The price of wheat has nearly doubled from about $200 per ton to $400 per ton in just a few months.
The current worldwide commodity boom began with the genuine increase in demand from the fast growth in emerging economies of the world. However, at least part of some of the recent increases appear to be driven by speculation in the commodities markets with many hedge funds and big investors trying to make a fast buck. One of the downsides of such speculation is that it may fuel worldwide inflation resulting in the central banks throttling growth. If the central banks decide to tighten credit, it will bring down inflation but also dramatically slow growth that has helped lift a large number of people out of poverty around the world. This will hurt the people of South Asia who have been experiencing a boom in recent years. We have already seen the impact of wheat and energy crises in Pakistan and these crises are likely to spread and assume greater significance in the whole region and the world.