1 reply to this topic

[Douglas]

I watched Bubble Ben's speech yesterday in utter horror. I had previously assumed, like Bill Gross, that he was Chair Satan, an evil person who steals from pensioners and savers to enrich his bankster buddies, but his speech revealed a lack of understanding of the inelasticity of prices of commodities when demand exceeds supply, particularly, when part of that demand is from speculators who have no intention of using that commodity to make anything and couldn't care less what they pay for it since they don't have to incorporate it into something they have to sell. Bubble Ben refused to acknowledge that the marginal extra demand he had created for commodities by pumping money out could have an outsized impact on prices. For example, if we have a tight market with 10 pieces of copper in the hands of suppliers and users who need 10 pieces to stay in business and 1 speculator who wants 1 piece, prices aren't going to just rise 10% to match the 10% extra demand. They will rise to the point that one of the users goes out of business since the speculator is not pressured by a selling market. In contrast, speculative demand actually rises as prices rise. Prices could double or triple. Who knows. Bubble Ben's lack of understanding of price discovery in commodities is very concerning. He clearly needs to find another line of work. The slow down in demand caused by all the weather, etc. factors mentioned in the speech has provided a needed cooling of prices, but if QE3 is announced, this may turn into a very hot commodity summer.

[arbman]

Ben can only print and watch what happens and see if he printed enough... When he doesn't print the entire market collapses with the commodities leading... Ben is the dummy honestly and the bankers are only in the printing business to make money (buy from Treasury and sell to Fed). Time to time, they will run over the speculators when they pile up. But I don't think it is as much of an issue as the economy that will not create the liquidity to replace Fed's printing for many more years to come. Essentially, Fed can actually kill the US economy as you say, but I think US Treasuries would blow up before an inflationary depression happens... If anything, the deflation seems to be still the biggest risk, there is no credit growth or leveraged (speculative) borrowing to flow into the hard assets, imho... For sure, the rising commodity prices are squeezing the producers and lowering the living standards and costing to savers, but it only lasts for a while until Fed stops printing... Just my thoughts and observations...