WEEKLY CORN REVIEW: "D" Word Enters Corn Market's Vocabulary
Most of us have never experienced true deflation.
Bryce Knorr
Published: Nov 24, 2008
There are a lot of four-letter words that come to mind about the current state of the corn market. One word, which has many more letters, was heard this week that really sparked fear in the guts of traders: Deflation. Nothing is feared more in the world of commodities.
The good news, muttered whistling past the graveyard, is that extreme talk like this is the sort of abject capitulation typically heard when markets are bottoming. The bad news, of course, is that it could be true.
Inflation sparks plenty of fear in those who have lived through periods of sharply rising prices. Most of us, however, have never experienced a true deflation, the last one being during the Great Depression of the 1930s.
Government officials know how to fight inflation. Just ask Paul Volker. Raise interest rates high enough and the spiral will collapse — along with those sectors of the economy that are capital intensive, like agriculture. You'll have a farm crisis, like the 1980s, but the inflation dragon will be slain.
Deflation is a whole 'nother matter altogether. Nobody really knows how to cure it. World War II finally got the U.S. economy running again after the 1930s, the sort of extreme fix that's part of our nightmares.
To read Bryce Knorr's complete weekly corn review, click HERE.
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