Commodities Head for Biggest Weekly Decline in Over 50 Years

[RedEarth]

Source: (Bloomberg)

Oct. 3 (Bloomberg) -- Oil, copper, and corn drove commodities toward their biggest weekly decline in more than 50 years on concern that the worst financial crisis since the Great Depression will push the U.S. into recession.

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week, the most since at least 1956. Manufacturing declined to a 7-year low in the U.S. and contracted at the fastest pace in 16 years in the U.K. last month. Initial jobless claims rose to the highest since 2001, the U.S. Labor Department said yesterday.

``Panic, risk aversion and liquidation of contracts are characterizing the oil market as well as many other markets at the moment,'' said Thina Saltvedt, a Nordea Bank AB analyst in Oslo. ``Prices are not only being set by fundamentals, but fears of how crises in the financial sector may spread to other parts of the economy.''



Read more: http://www.bloomberg.com/apps/news?pid=20601082&sid=a9dS3pw.eIos&refer=canada

[no_hypocrisy]

1. Okay. Where's the money going then?

Not to stocks. Not to banks. Not to real estate. Not to overseas currency.

Where?

[Warpy]

2. There's a run on hedge funds right now

and those hedge funds are liquidating equities and commodities futures so they can pay off people who want out.

That's where the money's going. Eventually that money will find its way back into equities or commodities, but it's probably going to take a stop into T-bills along the way as an attempt to preserve capital.

[orwell]

4. Up in smoke...

...into the growing maw of hedge fund redemptions and exploding derivatives.

There is also a separate flight to quality into T-Bills.

People would rather have a return of their investment than on their investment.

[L. Coyote]

7. Easy come, easy go. Values are adjusting as the speculations balloon deflates.

[Dr.Phool]

3. We're gonna get pushed into a recession?

Holy Shit Batman!

Did Captain Obvious just get back from vacation?

[zazen]

5. will this offset rise in prices of oil/food for a while? (cynical, stupid question, I know) n/t

[stubtoe]

6. No, a reasonable question. My guess on the answer is "no it won't".

Seems like price drops never propagate through the economy as quickly as price rises do.

[LeftHander]

8. "D" word....Deflation.

Something no one want so to talk about.

How ever the Fed has been pumping money in. But that money simply adds to a mountainous debt that is exponentially growing. Other nations will stop buying our debt when it is realized it is pointless.

I think the dominoes are falling...there is no stopping it just slowing it down a bit we will make semi-soft landing...but we missed the plateau and are falling into the grand canyon.


From Wiki -

The deflation of the Great Depression, as in 1836, did not begin because of any sudden rise or surplus in output. It occurred because there was an enormous contraction of credit (money), bankruptcies creating an environment where cash was in frantic demand, and the Federal Reserve did not adequately accommodate that demand, so banks toppled one-by-one (because they were unable to meet the sudden demand for cash— see Fractional-reserve banking). From the standpoint of the Fisher equation (see above), there was a concomitant drop both in money supply (credit) and the velocity of money which was so profound that price deflation took hold despite the increases in money supply spurred by the Federal Reserve.

[bemildred]

9. Yes, and it is worth remembering that it took 4 years or so for the "crash" to happen.

And "recovery" was not complete until some years after the end of WWII.