Whither Oil and the Dollar?

In the first place, if I knew I wouldn't be wasting my time blogging; I'd be relaxing at the English Country Home my wife wants which I could have bought from my profits.

But I've been skeptical that the current boom in farm crop prices can continue, remembering the lessons of the 1970's.

On the other hand, Kevin Drum (and Paul Krugman) think oil is permanently high. Kevin notes that the government bureaucrats have been predicting oil is at a peak for months. (I thought it'd peaked at $50.) And oil and food are linked, because both are traded in dollars. (And oil is a key input to food production.)

It seems every day you get different messages. Today I saw a post which agrees with my position (i.e., that now is most like the mid-70's) but unfortunately I didn't capture it, so you'll have to take my word for it. The common element of now and the 70's is the devaluation of the dollar--Nixon took the U.S. off the gold standard in 1971, I think it was, which made our grain cheap and the world took advantage. This decade the dollar has again gotten dramatically weaker. But here's the ERS study on the rising costs. The author doesn't totally agree with me, but close enough for government work.

(One factor not given much attention in the media is that we've had 2 years in a row of a global food production declines (i.e., bad weather):

"The result of adverse weather in 2007 was a second consecutive drop in
global average yields for grains and oilseeds. In historical perspective, two
sequential years of lower global yields occurred only three other times in the
last 37 years."

Bottom line, I'm still stubbornly holding to a prediction--oil prices and farm prices will both drop by at least 50 percent from current levels over the next years.