Speaking of inflation, some alarmists are concerned about a “bubble” in oil prices, citing the recent run-up. Well, it all depends on your point of view.
If you look at it from a U.S. dollar perspective, it does look like oil has been rallying strongly:
Source:Bloomberg WTI price
Look at the same data from a currency perspective of a commodity producing nation and you get quite a different picture in, say, Australia:
In Aussie dollars, oil prices are flat and can be justified because a large part of their costs are denominated in its own (strong) currency.
What we have is not a bull market in commodities so much as a bear market in the dollar.
We also see why hard assets are a good hedge not just against inflation but against currency weakness as well.