Soros’ testimony (#2 is the most intriguing one):

First, the increasing cost of discovering and developing new reserves and the accelerating depletion of existing oil fields as they age. This goes under the rather misleading name of “peak oil”.

Second, there is what may be described as a backward-sloping supply curve. As the price of oil rises, oil-producing countries have less incentive to convert their oil reserves underground, which are expected to appreciate in value, into dollar reserves above ground, which are losing their value. In addition, the high price of oil has allowed political regimes, which are inefficient and hostile to the West, to maintain themselves in power, notably Iran, Venezuela and Russia. Oil production in these countries is declining.

Third, the countries with the fastest growing demand, notably the major oil producers, and China and other Asian exporters, keep domestic energy prices artificially low by providing subsidies. Therefore rising prices do not reduce demand as they would under normal conditions.

Fourth, both trend-following speculation and institutional commodity index buying reinforce the upward pressure on prices. Commodities have become an asset class for institutional investors and they are increasing allocations to that asset class by following an index buying strategy. Recently, spot prices have risen far above the marginal cost of production and far-out, forward contracts have risen much faster than spot prices. Price charts have taken on a parabolic shape which is characteristic of bubbles in the making.

Bernanke acknowledged dollar's slide against other currencies has led to an "unwelcome" rise in U.S. inflation and may be a factor in inflation expectations.  Full speech here.

General Motors CEO Rick Wagoner said the company plans to cease production at
four North American plants that build pickups, SUVs and medium-duty trucks amid
the sharp rise in oil prices and the "significantly more difficult" auto market.
The company plans to fund its Chevy Volt electric vehicle for commercial
development and hold a strategic review of its Hummer brand. Auto makers are
scheduled to post monthly sales results later today.

Robert Barro's bloomberg interview (audio mp3) on monetary policy, economic growth, China's development experience, economics of religion, etc.

Benn Steil, Director of International Economics at Council of Foreign Relations, thinks the commodities bubble was caused by sharp fall of US dollar and investors’ inflation concern. The commodities bubble is essentially a “currency bubble”, so he called.

Expressed in gold, prices of oil and wheat haven’t changed much.

And the correlations between commodities and US dollar increased to over -0.9 recently.

I am sympathetic to Steil’s view and I see some parallel between the housing bubble and current commodities bubble.

In 2001, when economy was in recession and Greenspan Co. cut rates 11 times to 1%. Investors, lack of investment opportunities after dot.com bubble, all flocked to housing sector. Actually, housing was probably the only bright spot then.

In current cycle, Bernanke co. cut rates in a similar fashion, prolonging dollar’s downturn, and investors again poured their money into the “safe haven” as a hedge both against inflation/US dollar and meager investment opportunities in a time of credit crunch, and twin crisis in both housing and financials.

Janet Yellen, President of San Francisco Fed, ruled out stagflation scenario and she forecast “the most likely outcome over the next couple of years is that total and core inflation will moderate from present levels”. But she thinks “The Federal Reserve cannot, however, be complacent about inflation”.

She somewhat shares the worry that “even if the direct influences of commodity prices on inflation eventually dissipate, they could still cause trouble…higher inflation could become built into inflation expectations and become self-perpetuating”. But she thinks so far there is no evidence for such case, especially inflation is very unlikely to pass on to the wage this time, causing a wage-price spiral like the 70s.

The full speech can be read here and her presentation slides here. Below are two nice charts from her presentation.

A nice house rent-versus-buy calculator from NYT, and related article.