Fed Could Present Unintentional Christmas Gift, a Deflationary Collapse

July 11, 2022 (EIRNS)—World commodity prices have begun to fall, sharply in some cases of which metals and food commodities are the most prominent. Examples given by Markets Insider July 9 are the copper price, which has dropped by more than 20% from May; corn, which has fallen by about 30% in price since May; soybeans, down about 15%; and wheat, down about 35%. Energy and wholesale electricity prices are the definite exception due to the NATO war and sanctions on Russia and the “green strategy of tension” being waged by U.S. and European governments against their own populations to compel them to stop using fossil fuels, produce less food, use less energy. But for commodities otherwise, the same sanctions’ destruction of liquidity and demand in their markets has set off a deflationary process. A serious recession, which was just this spring being confidently viewed by business economists as possible in “late 2023 or 2024,” is now hitting “global NATO,” and much worse is spreading in the developing sector.

There is no chance this will immediately affect runaway consumer-price inflation, because the monster sanctions have given the trans-Atlantic countries and many developing nations extreme shortages and breakdowns in physical-economic production and distribution.

But the Federal Reserve, which launched the inflation wave first in commodities markets with its money-printing blitz beginning in late 2019, has now helped trigger a reversal, and what could become a rapid oscillation of waves of inflation and deflation as dollar exchange rate spreads widen and the physical economies of the trans-Atlantic break down.

Long-term national commodity trade deals, now being actively promoted by President Putin’s Russia, can provide a price-stability alternative to this. Russia on July 6 inaugurated its first “national [not world-market—ed.] commodity index,” called the NAMEX wheat index, defined as the price of a metric ton of wheat delivered for shipping at the port of Novorossiysk on the Black Sea. Now, According to the Business Standard in Bangladesh, it has offered to sell 200,000 metric tons (“2 lakh”) of wheat to Bangladesh at a price, based on that index, which appears to be equivalent to roughly $500/metric ton (the S&P world market price is currently given as $605/metric ton). Other “national commodity indices” are to follow, reported the Central Bank of the Russian Federation on July 6.