Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Surging Commodity Prices the Unintended Consequences of Printing Money

Commodities / Quantitative Easing Jun 12, 2009 - 09:33 AM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleMike Larson  writes: So let me see if I get this straight. From their recent lows …

Crude oil prices have more than doubled — to $72 a barrel from $33.55.

Crude oil prices have more than doubled — to $72 a barrel from $33.55.

Gasoline prices have surged 62 percent to $2.62 a gallon from $1.62.

Gold prices have tacked on $147 an ounce. Platinum is up 27 percent and silver has soared 45 percent.

Wheat prices are up 17 percent, soybeans have jumped 49 percent, and corn has rocketed 25 percent.

At the same time, the difference in interest rates between 2-year and 10-year Treasuries has vaulted to 260 basis points. That’s just shy of an all-time record — a warning sign from the bond market that investors are mad as hell, and not willing to buy longer-term debt.

Meanwhile, the 10-year TIPS spread, or the difference between yields on 10-year nominal Treasuries and yields on 10-year Treasury Inflation Protected Securities, has blown out to 210 basis points from close to zero a few months ago. That’s another warning sign of rising inflation fears.

Rising prices for agricultural commodities, like wheat, are the unintended consequences of the Fed’s attempts at bailing out anyone and everyone.
Rising prices for agricultural commodities, like wheat, are the unintended consequences of the Fed’s attempts at bailing out anyone and everyone.

The unambiguous message: Federal Reserve money printing is out of control!

We’re seeing a replay of the 2007-2008 easy money-driven commodity and resource inflation — the unintended consequences of the Fed’s attempts at bailing out anyone and everyone.

Warning Signs Everywhere …

While Fed Chairman Ben Bernanke and his buddies are whistling Dixie in Washington, those of us in the real world are seeing warning signs of these unintended consequences everywhere …

From The Financial Times, June 10:

“After a year of worrying about the piggy bank, the world economy is turning its attention to the cupboard.

“Almost unnoticed, agricultural commodities prices have returned to levels last seen at the start of the 2007-2008 food crisis, prompting concerns about a fresh rise in food costs.”

Or how about this story from The New York Times, dated June 8:

“After just a few months of relief at the pump, cheap gasoline is disappearing.

“Gas prices have risen 41 days in a row, to a national average of almost $2.62 a gallon. That is a sharp increase from the low of $1.62 a gallon that prevailed at the end of last year … The national jump in prices, far larger than the normal seasonal increase, is pulling billions of dollars from the pockets of drivers. It threatens to curtail a modest recovery in consumer spending on items like apparel and electronics.”

The common thread here: Speculation, driven by easy money.

The Fed is debasing the value of our currency, driving investment dollars into dollar hedges. There’s so much money coursing through the markets, in fact, that it’s almost impossible to grasp!

Consider the following from The Wall Street Journal, also on June 10:

“About eight months ago, starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base — which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash — by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.

“The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10. It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base — which prior to the expansion had comprised 95% of the monetary base — has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base.”


Helicopter Ben is dropping money from the sky. The problem is he can't control where it lands!
Helicopter Ben is dropping money from the sky. The problem is he can’t control where it lands!

In other words, Helicopter Ben is flying toward the coastline, guns blazing — kind of like Colonel Kilgore in Apocalypse Now. I can almost hear the strains of “Flight of the Valkyries” every time I login to my computer in the morning.

See, the real problem with Bernanke’s approach is this …

You Can Create More Money … You Just Can’t Channel Where It Goes!

The real problem with all this pump-priming, money printing, or whatever you want to call it is simple: It’s like lava flowing downhill. It steamrolls everything in its path, despite all your best efforts to re-direct it.

Look …

  • The Fed tried to paper over the Long-Term Capital Management blow up with easy money and rate cuts. That helped launch the last leg of the dot-com bubble …
  • The Fed tried to paper over that bust with easy money and low rates, and helped create the biggest housing bubble in U.S. history …
  • Then the Fed tried to paper over the housing bust with easy money, and that helped inflate commodities bubble #1 …

Now, it’s trying to paper over the deep recession with … you guessed it … a gigantic wave of easy money! That’s giving us “The Son of Bubble” in some markets and laying the groundwork for a bigger inflation problem down the road.

I hear a lot of talk about how the Fed will supposedly be better this time. Some argue that it will pull back all this excess liquidity at just the right time, helping steer the economy through the twin threats of inflation and deflation with the greatest of ease.

As the Fed tries papering over the deep recession with a gigantic wave of easy money, consider protecting yourself with dollar hedges, such as gold.
As the Fed tries papering over the deep recession with a gigantic wave of easy money, consider protecting yourself with dollar hedges, such as gold.

All I have to say is, “Are you kidding me?”

These guys have been getting it wrong for years now, and we’ve lived through rolling bubbles as a result! Now they, along with the Treasury, appear to be working on a new one, devaluing our hard-earned dollars, and burying our children under the biggest debt burden in world history.

My suggestion: Consider protecting yourself from this monetary insanity with the right combination of gold, other dollar hedges, and investments targeted at the world’s hottest resources markets. And please, please, PLEASE continue to avoid the long end of the bond market, which has gotten absolutely thrashed — just as I predicted it would months ago.

Until next time,


This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Money and Markets Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules