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Not Just Oil: Guess What Happened The Last Time Commodity Prices Crashed Like This?… It isn’t just the price of oil that is collapsing. The last time commodity prices were this low was during the immediate aftermath of the last financial crisis. The Bloomberg Commodity Index fell to 110.4571 on Monday – the lowest that it has been since April 2009. Just like junk bonds, industrial commodities are a very reliable leading indicator. In other words, prices for industrial commodities usually start to move in a particular direction before the overall economy does. We witnessed this in the summer of 2008 when a crash in commodity prices preceded the financial crisis in the fall by a couple of months. And right now, we are witnessing what may be another major collapse in commodity prices. In recent weeks, the price of copper has declined substantially. So has the price of iron ore. So has the price of nickel. So has the price of aluminum. You get the idea. So this isn’t just about oil. This is a broad-based commodity decline, and if it continues it is really bad news for the U.S. economy. Of course most Americans would much rather read news stories about Kim Kardashian, but what is happening to the prices of these industrial metals at the moment is actually far more important to their daily lives. For example, when the price of iron ore goes down that is a strong indication that economic activity is slowing down. And that is why it is so troubling that the price of iron ore has almost sunk to a five year low. The following comes from an Australian news source…
Copper is probably an even better economic indicator than iron ore is. Economists commonly refer to it as “Dr. Copper”, and there is a really good reason for that. Looking back over history, the price of copper often makes a significant move in one direction or the other before the economy does. And now that the price of copper just hit the lowest level that we have seen since the last financial crash, alarm bells are going off. The following comes from an article by CNBC contributor Ron Insana…
So is the global economy heading for rough waters? Could 2015 be a very rough year economically? According to Insana, the signs are all around us…
In addition, the Baltic Dry Index is now at the lowest point that we have seen at this time of the year since 2008…
What does all of this mean? It is commonly said that those that do not learn from history are doomed to repeat it. So many of the exact same patterns that we witnessed leading up to the financial crash of 2008 are happening again. Unfortunately, very few people saw the last crash coming, and this next crash will take most Americans by surprise as well. I have written more than 1,200 articles about the economy on my website since 2009, and right now our financial system is more primed for a crash than at any other time since I started The Economic Collapse Blog. Hopefully we have at least a couple more months of relative stability, but without a doubt 2015 is shaping up to be the most “interesting” year that we have seen in the financial world in a very long time. All of the signs are there. But most people choose to believe that everything is going to be okay somehow. When the next crash comes, those people are going to be absolutely blindsided by it. When you see storm clouds on the horizon, the logical thing to do is to prepare. And the number one thing that most people should be working on is an emergency fund. So don’t be frittering your money away on frivolous things. In the early stages of this next crisis, you are going to need money to pay the mortgage, to put food on the table and to take care of your family. Just remember what happened back in 2008. A lot of middle class families were living on the financial edge every month, and because they didn’t have any cushion to fall back on, millions of those families ended up losing their homes when their jobs disappeared. You need to have an emergency fund that can cover at least six months of expenses. You don’t want a job loss or a major emergency to put you into a situation where your family could be put out into the street. And for those that still have lots of money invested in the stock market – I really hope that you know what you are doing. The market giveth, and the market taketh away. And when the market taketh away, the consequences can often be exceedingly cruel. |
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