Krugman believes commodity prices will rise inexorably as the world develops. But somehow that is okay.
So what are the implications of the recent rise in commodity prices? It is, as I said, a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding. This won’t bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.
But that’s for the future. Right now, rising commodity prices are basically the result of global recovery. They have no bearing, one way or another, on U.S. monetary policy. For this is a global story; at a fundamental level, it’s not about us.
I wish I believed this but I can’t convince myself. Endless growth at a more than infinitesimal rate R on a finite planet implies endless decline in impacts per unit of wealth at a rate
1/R 1/(1+R), and an asymptote where ultimately any economic activity has infinitesimal impact. Exactly what “wealth” means under the circumstances is not clear.