If you don't understand why things are happening, how do you expect to make good decisions?
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click here for the whole article.
http://seekingalpha.com/article/66208-too-much-money-chasing-too-few-commodities?source=side_bar_editors_picks
posted 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. There are big shifts in demand from the emerging economies, where incomes are rising, and folks are changing dietary patterns. The surging ethanol industry has put a squeeze on the corn market, and bio-diesel demand is fueling soybeans.
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“We have the tools. As Chairman Bernanke often emphasizes, we will do what is needed!!” Kohn warned. Those tools include driving the federal funds rate to zero percent, if necessary, pumping the money supply growth to above 20%, or buying long dated Treasury securities with printed money. It could trigger capital flight from the US dollar, and send gold, crude oil, and grains into the stratosphere.
.....
---------------------------
click here for the whole article.
http://seekingalpha.com/article/66208-too-much-money-chasing-too-few-commodities?source=side_bar_editors_picks
posted 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. There are big shifts in demand from the emerging economies, where incomes are rising, and folks are changing dietary patterns. The surging ethanol industry has put a squeeze on the corn market, and bio-diesel demand is fueling soybeans.
...
“We have the tools. As Chairman Bernanke often emphasizes, we will do what is needed!!” Kohn warned. Those tools include driving the federal funds rate to zero percent, if necessary, pumping the money supply growth to above 20%, or buying long dated Treasury securities with printed money. It could trigger capital flight from the US dollar, and send gold, crude oil, and grains into the stratosphere.
.....
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