- Over the past four months, in parallel with spectacular gains in the prices of coal and natural gas, there have been spectacular declines in the prices of lumber and iron-ore.
- A common argument against there being a general inflation problem is that the large rises in commodity prices are due to temporary market-specific supply issues, leading to large price declines as soon as the supply issues are resolved.
- As long as the inflation doesn’t become ‘hyper’, that is, as long as the value of money doesn’t collapse relative to everything, a large and rapid rise in the price of a commodity will result in additional supply and/or reduced demand, eventually leading to a large price decline.
For further details see:
Collapsing Prices In An Inflationary Environment