Monday, January 24, 2011

Copper Prices Rise to Record Highs, Thefts Rise Too

Paul Kedrosky reported yesterday that copper thefts are rising again, due to the all-time record high prices in recent months.  The chart above displays monthly copper prices back to 1980, and shows that copper prices have tripled from $1.40 per pound at the end of 2008 to recent highs this month approaching $4.50 per pound.  

According to a Google News search, there have been 545 news stories in just the last week containing the phrase "copper theft," and that compares to 665 stories during the entire year of 2009 when copper prices were between $1.50-$3.00 per pound, and 1,750 stories last year as prices rose above $4 per pound by the end of the year. 

11 Comments:

At 1/24/2011 6:52 PM, Blogger Benjamin said...

Let's go to a copper standard--everyone else would eventually turn green with envy.

 
At 1/25/2011 6:20 AM, OpenID financeandtradingmadeeasy said...

Hi,
Copper, Crude oil and gold futures are trading with a short bias for a few days now while if we see EURO/USD trend, it's in strong uptrend since 12 January.
Generally we see them trading in same direction,if we consider historical inter market trends.
Any idea which one will reverse first?
Thank you

 
At 1/25/2011 10:30 AM, Blogger Michael Hoff said...

Get ready for plastic pennies. Recycled, of course.

 
At 1/25/2011 10:36 AM, Blogger geoih said...

Can you say inflation? Copper, silver, gold, oil, sugar, wheat, corn, rice, cotton, etc. All comodity prices are soaring.

 
At 1/25/2011 11:26 AM, Blogger Junkyard_hawg1985 said...

Benji,
I don't care if the dollar is pegged to gold, silver, copper, or aluminum, I want it attached to something with intrinsic value. Since 1967 (shortly before closing the gold window, and the year I was born), the dollar has lost 97% of its value relative to gold, 96% of its value relative to oil, 92% relative to silver and 91% relative to copper. In the best cases, this is a 6%/yr drop in the value of the dollar.

Once again, fiat currencies return to their intrisic value in the long term.

 
At 1/25/2011 12:54 PM, Blogger Benjamin said...

Junkyard Dog-

Since 1967, the globe has gone thru an economic boom that has lifted billions out of poverty. In the USA, poverty has been so reduced that even "poor" people are fat, watching widescreen TVS and blabbing on their cell phones.

The only people poor today are those living in repressive non-free-market nations, or corrupt nations.

Prices? The goal is economic growth, not price stabiity. There is no moral superiority to stable prices, or mild inflation--there is moral superiority to economic growth.

BTW, Japan has had price stabiity for 20 years, and is entering a long stage of deflation. It is not pretty in Japan.

 
At 1/25/2011 3:42 PM, Blogger OBloodyHell said...

1) Mark, I'm kinda disappointed here. While you do provide information, you provide virtually nothing on WHY -- either links to previous posts, external articles, or other. Why the hell is copper shooting up like this? What has changed?


2) "Get ready for plastic pennies. Recycled, of course."
Uh, Michael, there's almost no copper in a modern penny, and hasn't been for decades.

From the wiki: 1982–present copper-plated zinc 97.5% Zn, 2.5% Cu

...(continued)...

 
At 1/25/2011 3:43 PM, Blogger OBloodyHell said...

...(continued from above)...

3) "Since 1967 (shortly before closing the gold window, and the year I was born), the dollar has lost 97% of its value relative to gold, "

Uh, JH, 10 years ago gold was @ about US$225 an ounce. Now it's around US$1400. So assuming your numbers are correct (not bothering to check) it was at about 16% of its value relative to gold?

Or is it more accurate to say that such a comparison is disingenuous in the extreme?

Tying the dollar to a fixed commodity such as gold is a ludicrous idea when you consider that the economy is now dealing with a non-fixed basis, to wit, IP & Services. We don't even begin to understand how different an economy that makes it, as IP is unlike anything else we've ever really tried to deal with as a commodity before. This is, IMNSHO, the thing giving economists fits, because most of them don't grasp this at all. IP, unlike the two prior bases for economies Goods and Food, does not derive its value in anywhere near the same way -- and that change is not just a difference of degree but of kind.

If I make food, or I create a good, and then I sell it to you, I HAVE THAT FOOD/GOOD NO MORE.

If I create IP, and sell it to you... I STILL HAVE IT JUST AS YOU DO. I can sell it again to another person. And another. And another -- until I run out of people who want it (at which point I lower my price and sell it to all the new people who may want it at that price)

Further, with Food, there is an up front cost and an on-going expense to production. I have to clear land, plant seeds, tend the plants, harvest the plants, separate the food out from the offal -- ALL LABOR INTENSIVE. And I have to do that for each and every successive piece of food I offer for sale.

With a Good, it's not all that much different -- I have to build a factory or workspace, buy the raw materials, hire people, do the work, and only THEN do I have a Good to sell. And in order to produce more of them I have to maintain the equipment and skills of the people while buying more raw materials.

IP is, once more, a phase change worth of difference -- ALL THE COSTS ARE FRONT LOADED. It's creating that FIRST item that costs money and time. After that, I can, once more, provide it at almost zero expense to every single person I can find to buy it.

The Austrian School has been predicting collapse for well over a decade -- and pulling their hair out because it's not really showing any sign of it happening. Their models aren't set up to deal with IP's unique qualities as a basis for wealth. There's a Nobel prize out there for someone who actually puts two and two together and figures out a model that can handle IP. It's probably going to be some young genius out of the PhD factory who does it, because none of the old codgers around seem to be able to make the break with conventional thinking on this matter. I haven't seen jack in the popular press about this matter and how to approach it or deal with it, and that means there's likely not much in the "unpopular press" about it, either.

============

No, JH, we don't need a "gold standard". A fixed commodity to track the value of a nearly infinite resource would be a catastrophe -- what we need is a good idea of how to value IP -- and, from that, a good idea how much value the Anglo-USA (and other nations, too -- India, China, Japan, France are the main sources of IP at this point) is truly creating -- and then we can actually tie US funding, budgeting, and the monetary supply to reflect that valuation in each year.

 
At 1/25/2011 4:36 PM, Blogger Junkyard_hawg1985 said...

"3) "Since 1967 (shortly before closing the gold window, and the year I was born), the dollar has lost 97% of its value relative to gold, "

Uh, JH, 10 years ago gold was @ about US$225 an ounce. Now it's around US$1400. So assuming your numbers are correct (not bothering to check) it was at about 16% of its value relative to gold?" - OBH

In 1967, Gold averaged $34.95/oz. Today, gold prices are $1326/oz. $34.95/$1326 = 0.026 or the dollar today has 2.6% of it purchasing power in gold that it had in 1967. This is why I said the dollar has lost 97% of its value relative to gold (97.4% to be more precise).

Money has 3 fundamental requirements to serve as a good replacement for barter:

1) Divisible
2) Storable
3) A Store of wealth

U.S. currency is certainly divisible and storable, but it is turning into a poor store of wealth. Earlier Mark posted an example in Argentina where people buy cars so they won't have to hold the Argentine Pesos. The way the Fed is treating the U.S. dollar, we are on a path to join them. Correction, we have joined them. That is why people are investing so heavily in commodities.

 
At 1/26/2011 6:44 AM, Blogger OBloodyHell said...

> U.S. currency is certainly divisible and storable, but it is turning into a poor store of wealth. Earlier Mark posted an example in Argentina where people buy cars so they won't have to hold the Argentine Pesos. The way the Fed is treating the U.S. dollar, we are on a path to join them. Correction, we have joined them. That is why people are investing so heavily in commodities.

In no sense do I disagree with this aspect of your premise -- but the solution you propose is defective because it is a dead solution to a historically altered scenario.

The solution is to gain control over the Fed's capacity to manipulate the money supply, and tie it to some kind of real-world effective metric. Right now, that "metric" is "How much does Congress want to spend"? THAT is the danger involved, not that it's not tied to a commodity.


Money is a proxy for barter. The amount of money you, an individual, are "worth" at any given time is tied to the value of your assets less your liabilities. In that sense, what you own can be turned into a big honkin' wad of cash (or a small honkin' wad of cash, if you're like me). That is your "personal money supply"

It reflects how much you can spend on something.

At any given time, the USA has assets and liabilities. The total money supply nominally should reflect and be tied to the total of those assets less the liabilities, just as they would be for you -- not to some arbitrary amount of something you have in stock.

Think about that -- what you're proposing is that your "credit limit" -- your nominal value of assets less liabilities be tied not to your assets less liabilities, but to some single, specific thing you have on hand -- how many bicycles you have. "I'm sorry, sir, but you can't have more than $500 to spend... you only have 5 bicycles and those are valued at $100 each. No, that land you own can't be figured in. No, that software you just developed and are selling to hundreds of people each day can't be factored in. No, we are only interested in your bicycles, sir. Yes, I realize you're upset. We're sorry you feel that way. If you want a larger cash position then perhaps you should trade some of that land for more bicycles, sir..."

 
At 1/26/2011 2:14 PM, Blogger Junkyard_hawg1985 said...

"The solution is to gain control over the Fed's capacity to manipulate the money supply, and tie it to some kind of real-world effective metric. Right now, that "metric" is "How much does Congress want to spend"? THAT is the danger involved, not that it's not tied to a commodity." - OBH

But the problem is that Congress will always want to spend more. Tying money to a commodity restricts their ability to do so. This applies to today's congress as well as the Continental Congress. Under the Articles of Confederation when money was not sound, inflation was rampant and it did serious damage to the real economy.

Likewise, why did Richard Nixon chose to abandon the Bretton-Woods agreement? Because they wanted to spend more than they had. Mark has another post today that shows one of the economic super-cycles occurred between the end of WW2 and the early 1970's. This economic supercycle occurred when global currencies were fixed together to the price of gold. When they abandoned this monetary policy, the global economic growth slumped.

 

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