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VIDEOSteel Prices Rise Amid Money Printing
While it won't take off immediately, this move is enough to shock deflationists.
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Pretend it's 1933, as so many in the deflation camp think it is or soon will be (at least from the price-of-everything standpoint). If you opened the Financial Times, would you expect to read the following headline in large print above the fold: "Steel Prices Set to Soar: Everyday Goods Will Cost More"?
To answer my own question: I don't think so.
As the Financial Times explained: "Global steel prices are set to rise by up to a third, pushing up the cost of everyday goods from cars to domestic appliances, after miners and steelmakers yesterday agreed to a ground-breaking change in the iron ore price system."
All along as I've talked about money-printing, I've said it wasn't possible to explain in advance which goods would climb in price (or when). I just knew that as the money leaked out, prices would ultimately rise. Now they have, to some degree, in various items. Steel is a great example along with other base metals, oil, health-care insurance, taxes, etc.
One shouldn't underestimate the psychological impact of an "event" like this, because at some point other industries will try to raise prices (some will be able to, others not), and intermediaries will attempt to pass along the price increases they get. At some point, as psychology changes regarding inflation, price increases will be acceptable or almost expected -- and that's how inflation eventually takes hold.
Steel Yourself for Higher Prices
I'm not trying to claim the rate of inflation is ready to ramp up drastically. But there are so many people who are so rabidly dogmatic about deflation -- and very few, ex perhaps myself and a small handful of folks who anticipate otherwise (and even I don't expect an imminent rise in inflation) -- that relative to what I think are well-entrenched deflation expectations, this rise in the steel price ought to be a shocking development.
Watch United States Steel Corp. (X), Arcelor Mittal (MT), Rio Tinto (RTP), Arcelor Mittal (SLX), and BHP Billiton (BHP).
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