Posted on 09/22/2007 2:38:23 PM PDT by shrinkermd
...There's one hell of a lot of fiat money sloshing around this world of ours, and it has to land somewhere. First it landed in tech-land, but during 2000 to 2002 the tech bubble collapsed. Greenspan dropped rates to 1%, and that prepared the U.S. economy for the next bubble.
This time the money poured into real estate and housing, and lo and behold, a brand new bubble was created. Alas, the housing bubble popped in late-2005, and today we find that real estate and housing is 'correcting.' So where's the money going to go now?
"Wait, I think I know. Some of it went into the equity funds and a lot of it went into commodities. Wheat, soybeans are running wild, and to give you just one example a year ago a bushel of wheat cost $5 bucks; now a bushel of wheat is over $9 dollars as wheat faces its greatest shortage ever. Crude rose to a new high today. Gold is over $700 dollars an ounce.
So is this the beginning of a commodity bubble? I dunno….Here's the DB Commodity Tracking index Fund which is traded on the Amex. It closed at a new high yesterday, so let me put it this way -- selected commodities are bubbling."
But if you reject the inflationary aspects of the good feelings, recall what happened after the Fed embarked on a series of rate cuts to blunt the potential economic effects of a fall in asset prices. On Jan. 3, 2001, the Fed surprised the markets with a half-point rate cut. The markets soared on hopes the tech bubble would only deflate a bit, not burst. In actuality, the lows wouldn't be reached for nearly two years.
(Excerpt) Read more at online.barrons.com ...
While I expect that commodities will try to be the next bubble, I don’t think it will last as long as the last two (tech and housing).
Rising commodity prices hurt everyone.
While I expect that commodities will try to be the next bubble, I don’t think it will last as long as the last two (tech and housing).
Rising commodity prices hurt everyone.
A commodity bubble by another name is inflation. What with all that fiat money sloshing around the world sooner or later it had to lead to inflation. Too much money chasing to few goods. When was the last time gold was this high? Remember the banana republic inflation of the 1970’s?
ping
Isn’t it the Fed’s job to contain inflation and not try to be the over-sensitive catcher in the rye rescuing Wall Street bankers from their own folly? We’d be better served by a computer program that non-politically adjusted key perimeters to keep inflation (M2 or M3) in the 2-3% range. The Fed seems to hop from bubble to bubble.
Ever since LBJ gave us slugs instead of quarters and dimes, we’ve had 100% fiat money.
In world history, there’s never been a transition from fiat money to real money without a disaster.
Three reforms: Abolish the Federal Reserve, abolish the direct election of Senators, abolish the income tax. Not coincidentally, all three of these blunders were imposed on the American people in 1913.
And by Progressives, what liberals want to call themselves today.
The Fed's job is to maintain orderly markets too. Were you around for the 1987 crash? The first day was bad. The second day was insane. Almost as if there were no buyers for stocks at any price. The Fed pumped in the liquidity Monday morning and by Monday afternoon a semblance of sanity had returned.
Was the charge to maintain orderly markets in their original charter? The Fed inflates currency to help monetize the Federal government’s debts. The inflation occurs unevenly throughout the economy and creates “wealth effect” illusions that lead to systemic errors or mis-allocations in sustainable demand for x or y (bubbles). The bursting of the bubbles is necessary to correct the economy. When they interfere to “create order” they just delay the required corrections.
Maybe so but we still have corrections. Why not cut them off before they do ANY damage?
Because corrections correct (the mis-allocations). The Fed rushed in to provide easy credit to soften the correction in 2001 from the Tech sector bubble before the recession could deal with the higher debt levels of consumers, corporations and governmental entities, and also provided the basis for the next bubble. Over-leveraged consumers started using their house as a bank (not good). Speculators saw that the easy credit could allow them to flip houses for a profit. The never-ending party for governmental orgs continued unabated.
Earlier than that. FDR took us off the gold standard.
In world history, there’s never been a transition from fiat money to real money without a disaster.
The actual disaster was going to fiat money in the first place.
Three reforms: Abolish the Federal Reserve, abolish the direct election of Senators, abolish the income tax. Not coincidentally, all three of these blunders were imposed on the American people in 1913.
All good, but now where to find a candidate for POTUS who also understands this and is willing to put it into practice?
(..think..)
(..think!!..)
Printing ever more fiat money is the definition of inflation.
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