Krugman- A Commodity Peak?

[n2doc]

WSJ: Commodity Surprise: Some Are Now Heading Down.

Good reporting on the slumps in cotton, copper, etc. But why, exactly, is this such a surprise?

Real commodity prices — that is, prices relative to the prices of goods that aren’t as volatile — have gotten very high by historical standards:


IMF
Some of this probably represents a long-term upward trend, as emerging economies place pressure on limited resources, but even so, you wouldn’t expect continued rapid rises, and in fact you should expect some regression toward normal levels as supplies, and to some extent demand, respond.

The only reason to believe that commodity prices would continue to soar would be if you thought that they were the harbinger of runaway inflation. But they aren’t.

So if commodity prices come down, and headline inflation declines back toward core, we’ll see the inflationistas admit that they were wrong, right? Also, pigs will fly.

http://krugman.blogs.nytimes.com/2011/05/02/a-commodity-peak/