Stimulus effect on commodity prices (inflation effects)

A lot of governments have decided on stimulus programs, usually these go into infrastructure (rail, roads and bridges, cars) all of which need steel for reinforcing. The consequence of which is a surge in demand for iron ore (so Australia booms), but there is a limit on how much can be extracted at once so the price rises. The increased price of raw materials then feeds into costs of production, for high cost countries it means more unemployment as firms move to cheaper production locations to try and offset the cost increases, so these countries governments increase stimulus spending and taxes to pay for it, rinse and repeat, government then start to adopt protectionist measures to cope with this.

China baulks at iron ore price rise → independent.co.uk/news/busin … 22346.html

King’s Cross to Beijing in two days on new high-speed rail network → telegraph.co.uk/news/worldne … twork.html

India Said to Propose Sovereign Fund for Oil Assets (Update3) → businessweek.com/news/2010-0 … ate2-.html

Work on Guangdong’s 2 oil bases begins → shanghaidaily.com/sp/article … 430613.htm

A lot slower than I expected, sure enough, but such massive sums thrown into the economy had to cause inflation at some stage.

You are confusing cause with effect. The expansion of the monetary base is the inflation, that’s already happened and continues, the rise in prices of commodities is a merely a symptom of that, that rise in price of raw materials like iron and oil feeds into the price of basics like food, clothes & heating, where in the previous decade in had tended to find it’s way directly into the FIRE (Finance, Insurance, and Real Estate) economy creating so called “good inflation”.

If you are a resource based economy like Australia, Canada, Russia and Saudi Arabia that’s great initially as you get the money first, but if you are a country that imports it’s raw materials and food then your prices start to rise and the citizens start to notice (hence the calls for the ECB and bank of England to increase it’s inflation targets to 4%).

For a country like Ireland it just adds more pain, peoples incomes have been falling and the rise in prices eats into their household budget, coupled with a rise in taxation due to the bailouts and debts being run up by the government it reduces income further and increases the likelihood of sovereign default across many countries at once. This was what made the great depression of the 30s “great”, the sovereign defaults of countries in Europe in 1931, bought down it’s chief creditor the USA.

You never present how can Ireland benefit from this inflation?

For all the monetarist attempt to redefine words, I’m not having it.

If the monetary base doubles, it’s not inflation until prices of goods and services rise to meet it.

A lot of the money created by the monetary base flows directly into financial products and not into the prices of goods and services.

Before monetarism existed, the meaning of inflation was “the rise in price of goods and services”, and guess what, the monetarist attempt to unilaterally transform the lexical meaning of the word inflation did not work out. You will have to deal with that. Words mean things.

If I decide that “cat” means “dog”, it does not mean that dictionaries have to be altered.

Perhaps you can guess why?

Here is what the old dictionary really said.

Webster’s Revised Unabridged Dictionary (1913 + 1828) → https://machaut.uchicago.edu/?resource=Webster’s&word=inflation&use1913=on

Pig Farmers are Making Brent Nervous → kitco.com/ind/Cook/nov112009.html