Paul Krugman economics: Deny, deny, deny!
- Thread starter Max E.
- Start date
Other factors can cause price changes. But at this point, it is the Fed.
One need only overlap QE expectations with commodity charts (just about any commodity) and you would see mirror images. Ricter would have you believe that this is because growth is driving more people buying commodities. But growth doesn't have the volatility that cheap money speculation does. Growth cannot explain a drop from $145 WTI to $30 WTI and then back to $100 in a scope of 3 years. Or corn. Or wheat. Sugar. Coffee. Soybean. ...blah blah blah.
He thinks it's all demand-pull, when in reality inflation we're seeing in the grocery store is cost-push.
I have done exhaustive analysis on this, as my job is working for a large consumer packaging goods company, in the finance group, on trade pricing. We have over 60 brands in your local grocery store.
Could this be why DHS is stockpiling ammo and amored vehicles? The end of Fed buying up all the debt or the inevitable currency crisis? I was also surprised by Volcker's comment. No way in hades the Fed will be able to exit QE without serious ramifications.
LOL So, according to you, prices shouldn't move because for every buyer there is a seller. While true that every transaction requires a buyer and a seller, that statement does absolutely nothing to tell you why prices actually do move. Given your foolish logic, you will just have to take the word of better thinking individuals that this stock market rally IS a result of Fed policy.
The argument that there is a commercial short for every long in commodities, or volatility in intraday pricing does not exonerate the Fed, Ricter.
The Fed issues billions of dollars daily to throw new money into the system. This devalues the currency in the macro sense - this doesn't mean the dollar can't still go up on a particular day, as none of these "markets" move in a straight line. As dollars devalue, investors holding dollars must speculate in asset classes in order to get a better return. They diversify out of said currency and into hard assets. Investors not holding dollars also buy these hard assets as they are priced in dollars, and become cheaper to foreign buyers. A great many, maybe even the majority - depending on the commodity - of these investors do not intend to take delivery of the commodity. They are speculating on it's rise. The Federal Reserve is driving the speculation. Who is at fault?
Our government would have you believe it is the evil speculators. But they are merely performing their role in an "efficient" market - driving money where it is most efficiently used. Of course when "money" becomes so common as under these circumstances, distortions occur in all sorts of asset classes. When it does, we attach the term "bubble" to it. Very little buying in a bubble is driven by demand of the end user of the asset, in the case of commodities. Even in housing, when driven to a bubble, little was consumed by the end user. You can only live in so many houses at a time. The rest were flipped and sold back into the market - driven by speculative funding, and searching for yield.
If cheap money were not around, you wouldn't be able to obtain the funding cheap enough to justify the risk of speculation (or the perceived return you would get). The cheap money comes directly from the Federal Reserve. Thus, the Fed is ultimately at fault for it.
Now all you're talking about is steady, very general upward pressure on all prices, long-term (Which is what we want). This is what cost of living increases are for. If you can't get one, you may be doing something wrong. Don't come back with "many people can't get that", because there are many reasons people don't get them, reasons having nothing to do with the Fed.
Quote from Tsing Tao:
Some "steady", very general upward pressure on commodities...
There's nothing "steady" about these increases and this volatility, all of which took place in the last 10 years.
What about the 2008 to 2013 period? You might want to include a chart of the dollar futures during the same period.
Your argument in which you attempt to link commodity pricing and speculation to Fed policy is not well bolstered by the charts you provided. Have you considered demand? supply?