Professor Mark J. Perry's Blog for Economics and Finance
It's not just gasoline (-56%) and oil prices (-66%) that have plunged since the July peak (see top chart above), but natural gas prices have dropped as well, with futures contract prices falling -56% from the July peak and more than -20% since the first of the year (EIA data here). 
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
1 Comments:
The collapse in the commodity markets conveys the real threat of DEFLATION facing the U.S. and world economies currently. Some misguided Fed officials and several "ivory tower economists" have been demanding higher interest rates to combat INFLATION?, showing their ignorance and one track thinking when it comes to the current economic turmoil.
The commodity sell of drove the stock market to new lows from August till November, evidenced by the correlation bewteen the Reuters CRB Index and subsequent sell off in the S&P Energy and Material Sectors (XLE,XLB). When compared to the Financial sector (XLF), the commodites and material stocks have sold-off much more, essentially causing the selling pressure that drove the DOW to new lows. These companies were the only bright spot in the economy, and now that prices have collapsed, profits will decrease, along with CAPEX and JOBS. Until we have price stability in all asset classes, the world economy stands on the edge of an enormous deflation spiral.
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