Where is the the imminent re-inflation story?

Letter to a friend:
Inflation is low and getting lower that is the fact and that is what I see/feel/understand/sense and read.   Also inflation may even at that be overstated in fact because it does not allow for any substitution which consumers can and regularly do. Why do inflation numbers not allow for substitutions?  Surely if some things soar in price we all can/do change.

Consider in the US cars now get 25% better gas mileage then even 5-6 years ago and that falling housing is the biggest expense for most US consumers!   Same here in Thailand where the new Camry car has 10% more horse power and yet uses 25% less gas. (No, not the hybrid which does even better).   More people live in cities now so consume less energy, you realize this reading great books like  "Triumph of the CITY".  I think gas usage is another top cost of US consumers....and  by far they just don't commute as much.

For sure there are many/horror problems still lingering in the US and no doubt inflation will one day come about again, but too many got it very wrong a couple of years ago in that they did not see the next show to drop which would be the EU, not the US.  Perhaps just now we are at its darkest with Spain getting the bailout and Germany getting bond rating decreases?  Nobody knows, which is another reason hiding out in Thai smaller cap, high dividend paying stocks, with no relationship to all that mess, has/is the right investor strategy for many of us.

In the meantime I think the sharpest commodities price boom ever recorded has come to a screeching halt of late...and it was all a bit naive for the bulls there to think that rising prices would not mandate  innovative changes.  Today the US is the energy leader again, with not least natural gas prices collapsing there to 1/7th the price they are in China... due to new ways of extracting it. (see my last member article).  One can always later state for this or that reason things have changed and so does one’s opinion:  the point is commodity.com was all unsustainable hype just like the technology boom/stocks where hype a decade before  At least the technology boom created new innovation and vast technologies besides a huge supply of fiber optic bandwidth,  vs. this last hype just seemed to nurture yet another financial speculation to nowhere which damaged many. All it did is increase inequality, hit the poor the most and install political tensions that go with this.  In the end capital was simply destroyed.

“In recent years producers of commodities from iron or to oil and copper have been spending tens of billions of dollars expanding operations based largely on projected demand from China that may not materialize.”   Breakout Nations, Ruchir Sharma

Commodity.com was driven by hype and fears besides a total lack of faith in human progress, and not least by the very institutions we both got to learn to hate: which turned commodities into financial products and then speculation through fear mongering.   Excitement about rising commodities existed only among some investors, financiers and speculators whom gained from it.  With daily trading in oil for example which dwarfed daily consumption at a rate of 22 to 1.  Commodities of all kinds where piled up not for use, but for speculative investments.  Call it the financialization of commodities same just like before with US housing loans.  The total sum of money invested in commodity funds has more than doubled over the last five years to some 400 Bill US$ (Cornerstone Analytics).  I never understood these bulls which seems to throw away the common sense notion that inflated prices for commodities so often carry the seeds of their own destruction.

I always disagreed with some which seemed to read only views which supported the negative side.  (Call it the cult of the amateurs) and instead I get my own views from great books and in other ways.   The daily deluge of negativity by sites like the “Daily Reckoning” and others which like "a hammer looking for a nail", are constantly looking for horror to supply their gold bullish views.  Troubles continue but with China and India now slowing the commodities bullish view has been deflated and this is good for developed countries. Beware. The coming bust in commodities may well endow the revival of confidence in the West.  A slowdown in China/India and oil prices, will shock the stars of the last decade.  In the post-war period an huge amount of data shows that the an overwhelming majority of miracle economies where manufacturing powers which means commodity importers not exporters.

The rate of global population increases has been slowing for nearly a century; besides 80% of the population increases, between now and year 2100, will come from age groups over fifty which consume less calories. Calorie intake drops with age. Russia’s wheat output has improves 20% of late but its still ¼ of that of France -and in Brazil simply improving the roads would dramatically lower the cost of food. Africa has 60% of the world's arable land and yet only 1/3 of this has been cultivated, so even the food scare Malthusian views of struggle and scarcity could be off.
 
"An era can be said to end when its basic illusions are exhausted".  Arthur Miller.