The Administration's Policy of dollar devaluation and Commodities price inflation:

[JohnWxy]

Excerpt from a post to Seeking Alpha by GAry Dorsch, a very knowledgeable market analyst:

http://www.geocities.com/jwalkerxy/Money_Policy_Commod_Infl.htm#tooMuch


Too Much Money Chasing Too Few Commodities
(excerpts)
posted by Gary Dorsch to Seeking Alpha on: February 27, 2008


A historic rally is underway in the global commodities markets. Central bankers in 18 of the top 20 economies in the world have been expanding their money supplies at double digit rates for the past several years, trying to prevent their currencies from rising too quickly against the sickly US dollar.

Nowadays, fund managers are pouring billions of dollars into commodities across the board, as a hedge against the explosive growth of the world’s money supply, competitive currency devaluations, and the negative interest rates engineered by central banks. To the chagrin of central bankers, much of new money pumped into the global markets is also going into commodities, instead of the stock market.

The remarkable run-up in prices of wheat, corn, soybeans, cocoa, rice, silver, platinum, gold, copper, iron ore, and crude oil have been blamed on supply shortfalls, strong demand for bio-fuels, and an inflow of $150 billion from investment funds.

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But the charts don’t lie, and sophisticated traders are not easily duped by the Fed’s smokescreens and brainwashing techniques. The Fed is slashing the federal funds rate at a frenzied pace, to arrest a year long slide in US home prices, which if left unchecked, threatens to topple the US economy into a severe recession. The slide in US home prices accelerated in the fourth quarter of 2007, with prices tumbling 8.9% last year, according to the S&P/Case-Shiller US National Home Price Index.




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In trying to put a floor under the housing and stock markets, the Bernanke Fed has cranked up the growth of the MZM money supply to an explosive 15.4% annual rate, which is also depressing the US dollar and pumping up the commodities markets to astronomical heights. The Fed has unleashed a speculative frenzy in commodities, and traders have lost faith in the central bank’s credibility.
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The US dollar is in a terminal decline marked by a loss of confidence in the Fed and weakened by big budget and trade deficits. A budget surplus of 2.4% of gross domestic product greeted Mr Bush as he took office, but under Bush, the US Treasury’s outstanding debt is about $3.6 trillion higher to a record $9.2 trillion.

[sharesunited]

1. It happened and is now being unwound. Dollar up and commodities down.

[JohnWxy]

2. Unfortunately that's not the whole picture. Once the dollar devaluation sent investors out of

stocks and into commmodities the trend was set in motion and then the commodities speculators moved in....


http://www.washingtonpost.com/wp-dyn/content/article/2008/08/20/AR2008082003898_3.html?hpid=topnews

The exemptions for swap dealers and the development of overseas markets allowed big brokerages to open the door for more hedge funds, pensions and big investors to move into commodities.

In the coming years, commodity investments by funds could grow to $1 trillion, veteran hedge fund manager Michael Masters said in testimony before the Senate earlier this year. In an interview, he said this trend could raise commodity prices for everyone in the coming years and "have catastrophic economic effects on millions of already stressed U.S. consumers."