Comments on: The Other Side of Fed Policy http://www.freedomtalks.org/2008/04/16/the-other-side-of-fed-policy/ The FreedomWorks blog dedicated to lower taxes and more freedom. Tue, 02 Dec 2008 03:29:10 +0000 http://wordpress.org/?v=2.6.3 By: Sickle http://www.freedomtalks.org/2008/04/16/the-other-side-of-fed-policy/#comment-80492 Sickle Thu, 17 Apr 2008 16:50:34 +0000 http://www.freedomtalks.org/?p=1465#comment-80492 Thanks, Chris, for explaining that to me. Appreciated. Thanks, Chris, for explaining that to me. Appreciated.

]]> By: Chris Kinnan http://www.freedomtalks.org/2008/04/16/the-other-side-of-fed-policy/#comment-80439 Chris Kinnan Thu, 17 Apr 2008 00:21:57 +0000 http://www.freedomtalks.org/?p=1465#comment-80439 When the Fed cuts interest rates, it puts more dollars into the economy. The law of supply and demand works for currencies, too. So commodities that we need to buy in the global marketplace (oil, food, etc) become more expensive, in dollar terms, because every dollar we hold is worth a little bit less now. Of course, Fed "loose" monetary policy doesn't explain the commodities run-up completely, as there are many other factors in play, especially in food markets. But I think Fed policy is a major factor...as is the response to Fed policy, as investors pump money into assets (like commodities) that will hold their value as the dollar crashes. When the Fed cuts interest rates, it puts more dollars into the economy. The law of supply and demand works for currencies, too. So commodities that we need to buy in the global marketplace (oil, food, etc) become more expensive, in dollar terms, because every dollar we hold is worth a little bit less now.

Of course, Fed “loose” monetary policy doesn’t explain the commodities run-up completely, as there are many other factors in play, especially in food markets. But I think Fed policy is a major factor…as is the response to Fed policy, as investors pump money into assets (like commodities) that will hold their value as the dollar crashes.

]]> By: Sickle http://www.freedomtalks.org/2008/04/16/the-other-side-of-fed-policy/#comment-80438 Sickle Wed, 16 Apr 2008 23:37:50 +0000 http://www.freedomtalks.org/?p=1465#comment-80438 Okay, I see what you're getting at. What's the mechanism by which these fed actions affected the commodity prices, though? I think that's the part I'm missing. Okay, I see what you’re getting at. What’s the mechanism by which these fed actions affected the commodity prices, though? I think that’s the part I’m missing.

]]> By: Chris Kinnan http://www.freedomtalks.org/2008/04/16/the-other-side-of-fed-policy/#comment-80433 Chris Kinnan Wed, 16 Apr 2008 22:52:18 +0000 http://www.freedomtalks.org/?p=1465#comment-80433 Hi Sickle, I'm just trying to show the connection between Fed monetary policy and the increase in commodity prices. It's been a dramatic run since August. Hi Sickle, I’m just trying to show the connection between Fed monetary policy and the increase in commodity prices. It’s been a dramatic run since August.

]]> By: Sickle http://www.freedomtalks.org/2008/04/16/the-other-side-of-fed-policy/#comment-80432 Sickle Wed, 16 Apr 2008 22:36:22 +0000 http://www.freedomtalks.org/?p=1465#comment-80432 Can you expand on your point here Chris? I'm trying to understand what exactly I supposed to glean from the graph. Can you expand on your point here Chris? I’m trying to understand what exactly I supposed to glean from the graph.

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