Since rising commodity prices generally do not occur in an economic downturn, when demand is low, it is logical to look to the Fed money printing as the reason for the two-year record high of oil, the rocketing food prices and the new record price for copper.
The U.S. dollar used to be a reserve of value, where those holding dollars could reserve in the dollar their wealth.
Once the Fed announced it would print money and lower the value of the dollar, those with dollars began to seek other things to hold or increase the value of their money.
Oil and other commodities are a non-currency refuge — since buying Euros with dollars seems somewhat risky right now — so the Fed’s announced intention to lower the value of the dollar is causing a flight to something else that will hold value. Oil and copper are two examples.
Printing money may be fun and easy for the Fed, but it has real costs for every American.
Next time you fill your tank up with gas this Christmas season, remember it’s a present from the Fed.
Between the massive expansion of government spending and power under Obama, and the take-over of various industries, combined with the destruction of the value of the dollar and flight to commodities to hold or increase that value, is it any wonder that prudent U.S. businesses are not spending or investing?
I predict a flight to other currencies next. Like, for example, the Brazilian Real — especially if the Fed starts bailing out bankrupt U.S. cities and states because Congress did not ban the Fed from doing so.