EDITOR'S NOTE: By now, most of us are aware of the plunge in the prices of commodities. Few of us likely made the comparison between the fall in commodities and the drop in real estate and other asset markets in 2008. Societe Generale draws a similarity between the two, claiming that a deep recession, similar to what resulted in 2008, is what’s to follow in the coming months. Dr. Copper and its industrial counterparts constitute the first leg of this rout. The “big surprise” in the coming months, according to the bank, is a massive and global deflationary wave on top of a cyclical bust. Well, it’s clear that the Fed overshot its inflationary target of 2%. What’s the likelihood that it will also overshoot its deflationary target of 2%? Given its poor aim and the months-long lag time to see whether its policies made an impact or not, we’d wager on the more cautious side, even if that meant taking a pessimistic outlook. Optimistic forecasts toward the economy have been just as “transitory” as the Fed’s inflation narrative. In other words, hedge your wealth and brace for impact.
The “big surprise’’ in coming months will be the collapse of inflationary pressures around the world, says Societe Generale. US CPI food prices will plunge into deflation, just as they did in 2008, it says.