Rising commodity prices and a reminder of the 1970s

Commodity prices rose across the board on Thursday, with oil surging up roughly 5 percent to more than $120 a barrel. No single fact seems to have caused Thursday’s broad rise - economic data recently released were, if anything, bearish - although many have pointed to a 1 percent drop in the value of the US dollar. As the trading logic goes, if one does not trust the dollar, one can always sell it to purchase “stuff� such as nickel, copper, oil and what not. The logic holds doubly if one expects the dollar to get weaker still.
Regardless of the reason for the commodity price increases, they most certainly have happened - and happened in force.
The Stratfor does not predict commodity prices, instead it predict what the effects would be on the geopolitical constellation of the day. As earlier argued, sustained high commodity prices at this level begin to have very real geopolitical impact and can begin to influence the rise and fall of nations as oil- and mineral-rich backwaters reap record gains and unfortunate importers of everything from natural gas to grains suffer a tangible setback on the world and economic stage.
But there is something else to note. If prices rise but a touch on August 22, the increase for the week would have been the strongest since 1975. That number - 1975 - is one that catches our attention.
For those of us who remember the mid to late 1970s, it was a scary time. The Soviets were coasting on record-high oil revenues and were on a tear internationally. Moscow’s subsidies and arms sales made the world seem as if it were on fire and the Cold War had been lost. The sustained strength in commodity prices almost single-handedly caused economic stagnation in the United States and made inflation a globally entrenched phenomenon.