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Post by signsandwonders »

I figured I would start a thread on this topic, considering there isn't one already. I've been following the financial news of late via CNBC's website as it's and market conditions appear to be bearish, at least as far as stocks and bonds are concerned.

Today I read an article on CNBC's website regarding gas prices ( ... ation.html). With regard to inflation, I doubt it really needs to be said that fuel is a big driver as it is required to in other to bring commodities to market at all stages (production and distribution alike) and as everyone well knows, this includes bringing the commodity of labor power itself to market (that is, your daily commute)

Inflation is also a factor in the class struggle, where the bourgeoisie takes profits that, previously, for one reason or another, it could not. The CNBC article quotes from Twitter:
Prices had previously hit all-time highs on Tuesday and Wednesday.

Consumers are now paying 32 cents per gallon more than they were last month, which translates to $125 million more per day spent on gasoline, according to GasBuddy’s Patrick De Haan.
This thirty-two cent increase translates into one-hundred plus million dollars per day of revenue for the gas companies. But what drives this price increase? According to the article:
Part of the surge in prices is due to refiners — which turn crude oil into the products such as gasoline that are used daily — already running near full capacity.

Refining capacity is lower than pre-pandemic, while demand for petroleum products has rebounded as economies around the world resume operations. Lost products from Russia has further exacerbated an already tight market.
Russia aside, why would refining capacity be lower than during the pre-"pandemic" period? Unless refineries have been dismantled and sold off for scrap, then there should be the same amount of technical ability for refining. Presumably, then, refinery workers have been laid off and not called back (or otherwise diverted to other projects, perhaps), leaving refineries that could be utilized lying idle, enabling gas companies to reap higher prices with less output.

As I mentioned above, stocks and bonds are currently bearish (i.e., prices are in a downward trend). What I, or someone inspired by this post should check out, is whether or not commodities in general are also bearish. In recent times they have been involved in the same upward movement as the rest of the market for stocks and bonds was, and recently came to an end. However, this was in part due to supply shocks resulting from covid related lockdowns which are still rippling through the economy. Secondly, because commodities markets relate to actual goods (as opposed to the "fictitious" nature of stocks, bonds, and now cryptocurrencies), they tend to be used by traders as hedges against inflation (which, ironically, acts as a cause of inflation in the real economy as investors flood into the commodities markets when stocks and bonds begin to appear to be overvalued and/or inflation is predicted). So these are two reasons why commodities could continue to rise even as stocks, bonds, and cryptocurrencies fall.

On the other hand, as a counterexample to the "hedge against inflation" cause for a continued bull market in commodities is the fact that gold and silver are both dropping in price alongside the rest of the market. Why would this happen? Because the markets for fictitious capital is highly dependent on debt ("margin"). As the values of fictitious capital declines, especially rapidly, the debt issued in order to purchase fictitious capital is called in ("margin call"). If a trader is met with margin call and does not have the cash on hand to cover it, she or he must liquidate some of his or her holdings in order to meet it. As commodities do not bear interest or produce a dividend (there's no income from holding them - only from selling them), they are what traders liquidate first in order to meet margin.

However, gold and silver may not operate in the market like other commodities because these two commodities are themselves essentially money. Oil, wheat, and orange juice are produced in order to be consumed; gold and silver are produced in order to be traded. So while positions in the consumable commodities may be liquidated in order to make margin, they may still also be propped up by supply chain issues in the real economy. This could keep prices high even as purely speculative action gets curtailed among Wall Street traders who are trying to meet margin and are also seeing credit dry up as a result of the winding down of Quantitative Easing on the part of the Federal Reserve (which greatly facilitated the bull market of the past two years).
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