Aug 09, 2008 (LBO) – The deflation of the oil bubble appeared to take hold in August as long expected by economists who identified it as a ‘monetary shock’ from reserve currency central banks, and Iran called for a probe into the root causes of the price spike. Oil and commodity prices raced to new heights in 2008 despite ‘economic growth’ slowing worldwide while politicians and other analysts claimed there was a ‘shortage’ of food and oil or that there was a global ‘crisis’ of one commodity or other.
But the International Monetary Fund has said the bubble must end sooner rather than later after the underlying credit bubble burst.
“â€¦commodity prices have to date remained strong despite the signs of weakening economic activityâ€¦,” Simon Johnson, IMF’s research director and economic counsellor told reporters after the release of the World Economic Outlook report in April.
“In fact, I cannot recall a time where I have seen such a striking dichotomy between global commodity and credit markets each sending conflicting signals regarding the global outlook.”
The IMF has called it the worst bubble or ‘boom’ since 1973, when commodities shot up and the world faced an ‘oil shock’.
The 1973 oil shock was caused by exc