We live in an age of bubbles. I suppose that this should come as no surprise.
The Greek roots of the word "economy" are oikos and nomia. The former meaning household, and the latter its management. For most of human history, this has been the purpose of the economy, to provide the means of subsistence by which a people survive. Karl Polanyi, the author of The Great Transformation wrote in the midst of the Second World War about how the market may behave like a type of cancer. Economic activity and the production of profit is seen as an end unto itself, rather than simply the means by which societies produce the means by which they exist. And in doing so it unleashes what Polanyi called the "double movement."
The "double movement" is composed of an action and a reaction. The action is the expansion of the market so that the demands of the market, i.e. making a quick buck and the like, increasingly become the driving force in social organization. Labor and nature are commodified, as though the market itself produced them. This of course requires the believe that the market produces the children that feed the satanic mills (see Alexandra Harvey's the China Price if you think that satanic mills have gone out of style)
By making man and nature alike into commodities, the market lays the seeds of its own destruction. Because the demands of the market on mankind can not be sustained. When wages are forced beneath the subsistence level mankind cannot reproduce itself. When workers can no longer afford to have children, because starvation and illness takes thus they do produce, the market creates powerful enemies among those it presumes without power.
Labor is treated as having no more intrinsic value than sacks of potatoes. There is nothing sacred in being human. Only fodder for the market. What the economists miss in this, is that the action of the market produces a countermovement from society in order to preserve itself. Society is unwilling to commit suicide in order to fulfill the diktats of the market. Men and women eventually revolt when they are treated like objects to be bought and sold. And so we have the double movement. Society acts to push the market back into its place.
In living history, the double movement has always been at work. In the period from the 1880s to 1930s, the market was at work turning people into objects. This was the soylent green economy. The culmination of this movement came in the 1929 with the stock market crash. A financial bubble, where the market value of investments grew detached from the social value (i.e. what they would actually be consumed at), leading to a disastrous situation when the bubble popped. The human hardship of the Great Depression lead to society pushing the market back into the role that it serves best, providing the means of subsistence for society.
The problem is that when people are rendered into objects, they seek out meaning that is more substantial than markets and profit. And that force let loose can either be very good (see the New Deal) or very bad (see Hitler and the Holocaust). It's only when the market truly collapses in such a spectacular manner that the very existence of societies is at stake that you get punctuation and rapid collapse, with the necessity for non-market forces to sweep in and save the day. The harbinger of collapses of this sort are speculative bubbles where the market tries to create market value out of something that has much less value to society. The prices just don't line up. And with demand not matching supply, overproduction leads to rapid prices decreases, popping the bubble. The problem is that these popping bubbles often cause great social harm and dislocation. Think about the thousands of families forced from their homes by the foreclosure crisis.
And in the past 10 years we've seen two major bubbles burst: the internet stock bubble, and real estate. And we are on the verge of the third: Commodities.
And this bubble is far more serious than the other two, because it attacks the very fundamentals of human existence. If the price of bread becomes the subject of speculation, then the consequence is that the market price may soon rise beyond the means available to many to purchase it. And that leads to starvation. Tell a man in Nigeria that his families going to starve because some guy in New York has decided that rice options are a good "growth prospect." Can you blame the guy if he gets angry that his kids are going to starve to death so some broker can buy a boat for his lake house?
And Der Spiegel has the story. Der Spiegel's English service is one of the best sources of information for those looking for something else than the ra-ra cheerleading of the New York press. It's true that increased demand has raised the price of gas, but a far darker force is at work: speculators driven out of real estate and in search of the next bubble to build. Read the the Der Spiegel piece. I'll start you off with this.
Many people's standard of living is already at risk, and perhaps the prosperity of the nation as a whole could soon also be threatened.
The question is whether price rises are inevitable, because demand exceeds supply, or whether other, less obvious forces are at work: speculators who are taking advantage of the growing scarcity of resources to make a lot of money fast.
This is about more than just economics. It is also an ethical and highly moral question. Much depends on the answer, including the credibility of our economic system.