If an enemy sworn to the destruction of the global economy was given free reign, it would follow the strategies of its current leaders.

One key to destroying an economy is to break its pricing mechanism. What does an effectively functioning pricing system do? It creates a market of buyers and sellers who can meet, agree on a price, conduct the transaction, and create an information trail that permits future market participants to judge what might be a fair price for their transactions.

Another key to destroying an economy is to put too low a price on risky behavior. Why is it important to price risk accurately? Because if decision-makers do not assess the risk at the time of their decision, the economy will end up paying for the under-priced risk long after those decision-makers have left office.

So how have current leaders broken the pricing mechanism and under-priced risk? Here are three ways:

If you're hearing whispers that the dollar might be creeping up in value and that this might put downward pressure on commodities, then let me tell you: Don't you believe it. Although some upward adjustment might occur for the dollar, it's my opinion that this won't, by itself, reduce commodity prices. To think so is just too limited an economic scope.

First, we can believe that the platform of oil prices is going to hold solid. I do think that the price of oil will eventually recede, but it's not going to be soon and it's not going to be much. It'll be a couple years before we see any real decline, if we ever do. That reality gives us a good launching point for some speculation. Alternative fueling for motor vehicles will keep upward pressure on oils other than petroleum. Consider commodity soybeans, soybean oil, and palm oil as possible hedges. There's also potential in propane, and to me, natural gas is still artificially under valued. You might not think there's a relationship between these commodities and petroleum. Believe me though, there is. Also, like the high volume traded commodities, other vegetable oils, such as sunflower oil and cottonseed oil, are worth looking into.

Despite being on the verge of the best first six months of a year in the past 35 years, there are some concerns we may see a reversal in commodities over the next six months. This would come as a result of higher oil, copper and other raw materials prices that could put pressure on consumer spending and lead to a growth in supply.

The negative effects have already started to become visible as gasoline demand has slipped in the U.S. due to high costs, while gold purchases in India saw a plunge of 50% year-over-year. "I've probably been positive for seven years and this is the first time I think there could be really a dramatic secular reversal, that it's not just a pullback" Michael Aronstein, president of Marketfield Asset Management in New York, stated.

The impact will not pass unobserved for airline companies, who will face a decline in the number of travelers over the Fourth of July holiday, following soaring jet-fuel expenses. Copper and gold demand are also facing weak levels after the price for copper reached $4.2605 a pound May 5, the highest ever, while the price for gold reached a record $1,033.90 an ounce March 17, and is expected to average $850 this year and $750 next year.

The agendas of the G-8 meetings, gatherings of the finance ministers of the most powerful countries in the world, are still concerned about the credit crisis that has brought many financial firms to their knees and has caused chaos in the housing markets. Even so, they are now much more concerned about inflation.

According to Bloomberg, "Finance ministers from the Group of Eight nations said surging food and fuel prices have replaced the credit squeeze as the biggest threat to the world economy."

It happened fairly fast. At the beginning of the year, the world's credit problems began to accelerate. Mortgage-backed paper write-offs were so bad that many financial company stocks hit multi-year lows in March. Most had to go begging for new capital.

It was only as the first quarter ended that oil prices began huge run-ups and news turned to sharp increases in the price of corn and other agricultural commodities.

The "advantage" with inflation is that central banks can put money into commercial banks and brokerages, propping them up until the storm clouds pass. Getting oil and corn prices down is not quite as simple.

Douglas A. McIntyre is an editor at 247wallst.com.

Corn is used both in food for humans and as cattle feed. It is also the main ingredient of most ethanol-based fuels. There has been real hope that this kind of alternative energy will cut US reliance on gas. But, the price of corn is up 47% this year. That undercuts the value of ethanol as its price rockets.

The corn harvest in the US could be relatively poor this year, putting more pressure on food prices, both here and in countries where large numbers of people are under-nourished. Another run-up in corn could help drive yet another commodity inflation spiral.

According to Bloomberg, "Rainstorms sweeping the biggest corn states in the U.S. are damaging a crop that's already failing to keep pace with global demand."

The trouble with corn crops is that they cannot be easily replaced by any other agricultural product. And, there is pressure on wheat and soybean prices already.

The solutions to corn yields, are, unfortunately, long-term. Companies, led by Monsanto (NYSE: MON) are increasing research and production of genetically altered seed which will grow in harsh climates and poor soil.

But, that fix to the problem is several years off, and the acute problem is now.

Douglas A. McIntyre is an editor at 247wallst.com.

Readers of this space know that the railroad sector is one of the preferred sectors. After decades of unconscionable neglect, U.S. railroads are experiencing a resurgence, driven by international trade, commodities transport, and the rail's cost advantage over truck transport.

Further, the revival of the rails is not exclusive to one nation in North America. Canada also is seeing a healthy growth in railroad services and Canadian Pacific (NYSE: CP) is worth a review.

Analysts see 4-6% revenue growth for CP in 2008, in Canadian dollars, with grain, fertilizer and oil sands related shipment gains offsetting declines in forest products.

Another positive: analysts also expect CP to continue to improve rail system efficiency and fluidity, will overall better asset utilization

Bloomberg News reports that Ben Bernanke's talk about not cutting interest rates is strengthening the dollar. The result is that speculators are covering their short positions on the dollar and dumping their long commodity trades. These moves are causing crude oil, sugar and copper prices to tumble.

All I can say is -- fantastic! As I've posted, a weak dollar has boosted commodity prices and a strong one would reverse the tide of rising commodity inflation. These rising prices have squeezed consumers, whose spending accounts for 70% of GDP growth. If Bernanke's talk about putting a halt to interest rate cuts continues to strengthen the dollar, commodity prices could fall further.

In cutting interest rates from 5.25% to 2%, Bernanke has contributed to a rapid rise in commodity prices. But the accumulating evidence of building inflationary expectations has him returning the Fed to its roots as the defender of the dollar. Paul Krugman's weak defense of Bernanke's pro-inflationary policies appears to have marked their end.

Let's hope Bernanke will back up his strong dollar talk with a rise in interest rates.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Is there a way to cash in on the commodities bubble without actually playing the commodities market? (Which, Andrew Tobias handily dismissed in The Only Investment Guide You'll Ever Need: "It is a fact that 90% or more of the people who play the commodities game get burned. I submit that you have now read all you need ever read about commodities.")

Yes, there are a handful of ETFs that specialize in commodities. The Wall Street Journal reports that investors are getting interested in farming stocks and companies like Monsanto Co. (NYSE:MON) and tractor maker Deere and Co. (NYSE:DE). Smaller companies like China's AgFeed (NASDAQ:FEED), which produces animal food and pork, is trading at about $16, down from $20 a month ago, but still nearly triple its price a year ago.

Two food commodities that the boom has not impacted too much are potatoes (which are not really part of the international commodities market) and sugar, which is heavily subsidized and mostly doesn't trade on the open market. Sugar prices recently sunk to a seven-month low because of an oversupply, Reuters says.

The Associated Press reports that the Commodities Futures Trading Commission (CFTC) is investigating possible market manipulation by oil traders. The purpose is to shut down big trading bets that drive up the price of oil -- rather than follow the price discovery that results from the interaction of supply and demand. Since one source said that 60% of oil trading comes from speculators, the flow of capital into oil could fall as speculators stop their abuse. And the price of oil could drop.

The investigation went public yesterday and the CFTC appears to be examining whether investment banks are trading more than their share of contracts. As I posted, The Goldman Sachs Group (NYSE: GS) is among the investment banks taking advantage of a swaps loophole that classifies them as a commercial market participant -- like an airline -- instead of a trader. This loophole allows these banks to avoid disclosure of their bets that oil will rise.

This excess capital flowing into oil -- and against the dollar -- has driven up the price of oil. If the price of oil was set solely on supply and demand, it would surely drop. The numbers I posted here suggest that demand in the U.S. is down 300,000 barrels per day thanks to the slowdown in driving due to $4 a gallon gas.

Now if we could get Goldman and its peers to start betting heavily on a drop in oil prices and a rise in the dollar, we'd really be getting somewhere. What's good for Goldman is good for America -- or at least the top 0.1% of Americans.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Goldman Sachs securities.

Readers of this space know that one of my preferred sectors is the railroad sector. The growth in international trade, the importance of commodity transport, and record-high oil prices mean the rails will play a central role in the nation's economy. And a railroad stock worth owning is CSX Corp.

CSX Corp (NYSE: CSX) operates the largest rail network in the eastern United States, with a 22,000-mile rail network in 23 states and two Canadian provinces.

In general, analysts see 9-12% revenue growth for both 2008 and 2009, with continued pricing power (including expired contract re-pricings) and improved asset utilization.

Further, coal traffic should rebound in 2008, while intermodal traffic is expect to remain solid, even with a slowdown in the building materials and automotive businesses.

Also, several infrastructure improvements and capacity increases should improve CSX's delivery times and reduce dwell times. The Reuters F2008/F2009 EPS consensus estimates for CSX are $3.60/$4.23.

Currently trading around $68 with a p/e of 226, CSX is not cheap. But the view here is that the 3-5 year outlook is promising for this major rail line; moreover, the likelihood of persistently-high oil prices means more businesses will switch to rail transport for goods.

Call it one of the smartest decisions in food retail this year. McDonald's (NYSE: MCD) will not pass on the cost of most food commodities to its customers. It will keep most prices on its menu where they are today.

According to Reuters, McDonald's "is willing to absorb some of the higher costs for ingredients such as oil, meat and dairy to promote customer loyalty," Chief Executive Jim Skinner said. The company won't let upward pressure on its products hurt its business.

Some may see the program as short-sighted, a move that will erode margins and hurt earnings for the next couple of quarters or more. But McDonald's has the financial strength to support the move. It may be a way for the chain to pick up market share as inflation takes a toll on its competitors. If it raises prices, McDonald's will simply look more attractive.

Look for McDonald's same-store sales to be better than the competition. It is giving consumers a real reason to stop by.

Douglas A. McIntyre is an editor of 247wallst.com and author of the Ten Stocks Under $10 newsletter.

The U.S. government now says the price of food will rise 5.5% this year. That revises an earlier estimate of 4.5%. According to The Wall Street Journal, "The forecast released Monday by the Agriculture Department is the third consecutive month the agency has raised its food-inflation forecast."

The number may be too low. The last federal government data showed the cost of food rising more than it had in almost two decades. The prices of rice, wheat and corn are still near all-time highs, and global demand is likely to move those numbers higher. The demand for ethanol is an often-mentioned reason for the price increase in corn. There is little reason to see that changing.

If food costs were going up by themselves, things might not be so bad for American consumers. But consumers are being beaten down by the "triple play" of rising gasoline and food prices coupled with difficult access to credit. Their need for money is rising and their access to it is dropping off.

Food is part of a problem, but only a part. Until the government comes up with a solution, consumer spending is going to be limited to bread and gas.

Douglas A. McIntyre is an editor at 247wallst.com and author of theTen Stocks Under $10 letter.

A modicum of good economic news, at least on the commodities front: rice prices are headed for their biggest weekly drop in four years, on the prospect that exports from Japan and Pakistan will ease concerns that a global food shortage is worsening, Bloomberg News reported Friday.

As of mid-day Friday, rice had plunged 14% this week to $19.80 per 100 pounds.

Pakistan, the world's fifth-largest rice exporter, will allow shipment of 1 million metric tons because local needs have been met, Bloomberg News reported Friday. India may also ease its ban on rice exports. Rice is a staple for about 50% of the world's population.

Long-term, secular factors, including expanding middle classes (who consume more calories daily than lower-income groups) in Asia and Latin America, rising oil prices (which increase farming costs), have propelled a global rise in commodity, ingredient, and food prices.

Don't blame agricultural economists if they're feeling somewhat befuddled right now concerning wheat.

After two years of record price increases among grains -- including wheat -- and amid a global commodities price surge, and more than a month after predictions of wheat and bread shortages capable of producing social unrest, the U.S. Government is now predicting a global wheat production recovery for 2008.

U.S. wheat production to rise

The U.S. Department of Agriculture's latest estimate predicts that 2008 world wheat production will increase considerably, including an 8% increase in U.S. production to 656 million tons.

The USDA said good weather and record-high prices that have increased incentives to plant and farm effectively are the primary factors behind wheat's expected large harvest this year, Reuters reported Wednesday.

Wheat traded down 22 cents at $7.73 per bushel in Wednesday afternoon trading. Wheat has declined more than 20% since hitting a record-high $12.82 per bushel on March 12, 2008.

Analysts believe that Deere & Co. (NYSE: DE) has kept its hand on the plow. The general analyst consensus indicates solid expectations that the company will continue to perform at or above expectations. According to AOL Money and Finance, analysts are giving indications that Deere is a buy. In defiance of today's market pull back, Deere & Co. shares have gained one half percent as of this writing.

Media sources are openly optimistic about Deere & Co., though actual commentary is sorely lacking. Barron"s did go far enough to cite that some strategic execution failures of Deere competitors have played nicely for the company. With the weakened dollar giving solid momentum to Deere's international growth focus, and Deere equipment systems showing robust independent sales, for the time being the company appears to be a relatively safe harbor for longer term investment dollars.

Year to date return on Deere is just above a negative 3%, but the 5 year return on this company is over 300%. The best earnings estimates that I can lay a hand on hover around $1.75 per share.

Gary Sattler is a freelance blogger. He does not knowingly hold investment positions in the companies mentioned in this blog post.