Best of the Week

Cotton Inflation Illustrates Savers and Merchants Force to Price Resources in Ever Depreciation Currencies

Commodities / Inflation Nov 05, 2010 - 03:51 PM

Savers and merchants worldwide are being forced to price scarce resources in ever-depreciating money...

BLAME speculators, poor weather, global demand, or the Federal Reserve as you choose. Either way, sugar's up, wheat's up, and cotton's new record highs are starting to hurt Chinese textile makers.

Hence this bale in the wind. Clothing and footwear prices to UK consumers rose year-on-year in September for the first time since March 1992, hitting a two-year high in absolute terms.

Yet only now do central bankers fear deflation ahead. C'mon...where do they find these people?

"The longevity of what appears to be a speculative bubble in cotton prices," will determine 2011 profits at UK clothes retailer Next, it warned this week, adding that rising costs will force it to raise shop prices.

Over in China – which uses some 40% of the world's raw cotton output...and accounts for one-third of global textile exports – textile manufacturers face a "shortage of raw material", said industry group the China Federation of Logistics and Purchasing meantime, with last month's record-high prices "endangering" their survival.

For our money here at BullionVault, we'll blame loose monetary policy...and not just from force of habit, either. The Pound Sterling, like the US Dollar, looks further than ever from paying a positive real rate of interest – leaving both savers and merchants to price scarce resources in ever-depreciating, ever-more generously supplied currencies.

Short of an about-turn in monetary policy, the near-halving of UK clothing and footwear prices since 1989 appears finished.

Shop – and invest – accordingly.

By Adrian Ash

BullionVault.com

Gold price chart, no delay | Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Comments

Post Comment (Moderated)

Subject:

Name:

E-mail address (will not be published):

Comment:

Commenting Issue - If on submitting you are returned to the main Index Page (50% chance) then your comment has not been accepted, Follow below steps for 95% chance of comment being accepted.

Click your browser Back button (from main index page).
COPY your comment text from Comment box (i.e. copy to clipboard).
Press PAGE Refresh - You should see the message "You are not authorized to carry out this operation"
Paste your comment back into the comment text box.
Click Submit - If everything goes okay you will remain on the article page with the message "Your comment was held for moderation and will be reviewed shortly".
If instead you are again returned to the main index page then repeat 1-5, alternatively EMAIL to comments @ marketoracle.co.uk quoting the article number.

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2011 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.