Now tell me the Fed is not causing the current commodity crisis.

[Eugene]

EURUSD does not correlate quite as well as AUDUSD, as you can test for yourself. So, it’s not just the dollar decline. Australia is a major producer of commodities and their population is relatively low so a lot of their stuff is exported.

There are at least three ways of thinking about it –

* Bank of Australia causes the appreciation of the Aussie, higher export prices translate into higher commodity prices around the world.
* commodity bubble drives up profits of Australian farmers, creating inflation, Bank of Australia is forced to appreciate their currency to combat inflation.
* the same speculators who created the commodity bubble also invest large amounts of money into AUD, thinking (for example) that a high-yield commodity-driven currency would better withstand current crisis than the dollar or the yen.

It’s not easy to distinguish cause and effect.

[cooperthedog]

I tend to agree with arraya, especially in the long run.

I think the current price of oil is a little overdone, due in part to the dollar devaluation & easy money. If the world economies stall and/or the dollar rallies, oil should come off in the near term.

Long term though we run into declining supply and increased demand. The supply side can’t be remedied without major price increases, and even then the supply is still finite, so it just buys time. On the demand side, the world economies would have to peak or stagnant in order to curb demand, including a halt to emerging market infrastructure buildout & middle class consumption (which seems highly unlikely if oil prices moderate or decrease). Also, a concerted effort to use oil more efficiently, especially to power transportatnon, would need to occur. Ironically, transitioning everyone from gas guzzling vehicles to high mpg ones will require even more oil in order to extract the resources and build the new vehicles.

In my opinion, the only viable long term solution is to transition on a very large scale to renewable energy, primarily solar, using hydrogen as a carrier for high powered applications (liberated via renewable sources). I think the current oil “crisis” may actually be of great benefit if the US realizes that we need to build out this infrastructure now. In the intermediate term we will have to rely on coal, natgas, & nuclear until a truly renewable energy base is acquired. Of course all of this takes decades, and if we don’t start now, the pain will only get worse…

[cooperthedog]

I tend to agree with arraya, especially in the long run.

I think the current price of oil is a little overdone, due in part to the dollar devaluation & easy money. If the world economies stall and/or the dollar rallies, oil should come off in the near term.

Long term though we run into declining supply and increased demand. The supply side can’t be remedied without major price increases, and even then the supply is still finite, so it just buys time. On the demand side, the world economies would have to peak or stagnant in order to curb demand, including a halt to emerging market infrastructure buildout & middle class consumption (which seems highly unlikely if oil prices moderate or decrease). Also, a concerted effort to use oil more efficiently, especially to power transportatnon, would need to occur. Ironically, transitioning everyone from gas guzzling vehicles to high mpg ones will require even more oil in order to extract the resources and build the new vehicles.

In my opinion, the only viable long term solution is to transition on a very large scale to renewable energy, primarily solar, using hydrogen as a carrier for high powered applications (liberated via renewable sources). I think the current oil “crisis” may actually be of great benefit if the US realizes that we need to build out this infrastructure now. In the intermediate term we will have to rely on coal, natgas, & nuclear until a truly renewable energy base is acquired. Of course all of this takes decades, and if we don’t start now, the pain will only get worse…

[cooperthedog]

I tend to agree with arraya, especially in the long run.

I think the current price of oil is a little overdone, due in part to the dollar devaluation & easy money. If the world economies stall and/or the dollar rallies, oil should come off in the near term.

Long term though we run into declining supply and increased demand. The supply side can’t be remedied without major price increases, and even then the supply is still finite, so it just buys time. On the demand side, the world economies would have to peak or stagnant in order to curb demand, including a halt to emerging market infrastructure buildout & middle class consumption (which seems highly unlikely if oil prices moderate or decrease). Also, a concerted effort to use oil more efficiently, especially to power transportatnon, would need to occur. Ironically, transitioning everyone from gas guzzling vehicles to high mpg ones will require even more oil in order to extract the resources and build the new vehicles.

In my opinion, the only viable long term solution is to transition on a very large scale to renewable energy, primarily solar, using hydrogen as a carrier for high powered applications (liberated via renewable sources). I think the current oil “crisis” may actually be of great benefit if the US realizes that we need to build out this infrastructure now. In the intermediate term we will have to rely on coal, natgas, & nuclear until a truly renewable energy base is acquired. Of course all of this takes decades, and if we don’t start now, the pain will only get worse…

[cooperthedog]

I tend to agree with arraya, especially in the long run.

I think the current price of oil is a little overdone, due in part to the dollar devaluation & easy money. If the world economies stall and/or the dollar rallies, oil should come off in the near term.

Long term though we run into declining supply and increased demand. The supply side can’t be remedied without major price increases, and even then the supply is still finite, so it just buys time. On the demand side, the world economies would have to peak or stagnant in order to curb demand, including a halt to emerging market infrastructure buildout & middle class consumption (which seems highly unlikely if oil prices moderate or decrease). Also, a concerted effort to use oil more efficiently, especially to power transportatnon, would need to occur. Ironically, transitioning everyone from gas guzzling vehicles to high mpg ones will require even more oil in order to extract the resources and build the new vehicles.

In my opinion, the only viable long term solution is to transition on a very large scale to renewable energy, primarily solar, using hydrogen as a carrier for high powered applications (liberated via renewable sources). I think the current oil “crisis” may actually be of great benefit if the US realizes that we need to build out this infrastructure now. In the intermediate term we will have to rely on coal, natgas, & nuclear until a truly renewable energy base is acquired. Of course all of this takes decades, and if we don’t start now, the pain will only get worse…

[cooperthedog]

I tend to agree with arraya, especially in the long run.

I think the current price of oil is a little overdone, due in part to the dollar devaluation & easy money. If the world economies stall and/or the dollar rallies, oil should come off in the near term.

Long term though we run into declining supply and increased demand. The supply side can’t be remedied without major price increases, and even then the supply is still finite, so it just buys time. On the demand side, the world economies would have to peak or stagnant in order to curb demand, including a halt to emerging market infrastructure buildout & middle class consumption (which seems highly unlikely if oil prices moderate or decrease). Also, a concerted effort to use oil more efficiently, especially to power transportatnon, would need to occur. Ironically, transitioning everyone from gas guzzling vehicles to high mpg ones will require even more oil in order to extract the resources and build the new vehicles.

In my opinion, the only viable long term solution is to transition on a very large scale to renewable energy, primarily solar, using hydrogen as a carrier for high powered applications (liberated via renewable sources). I think the current oil “crisis” may actually be of great benefit if the US realizes that we need to build out this infrastructure now. In the intermediate term we will have to rely on coal, natgas, & nuclear until a truly renewable energy base is acquired. Of course all of this takes decades, and if we don’t start now, the pain will only get worse…

[capeman]

If you’re right then oil will be inherently a lot more expensive than it once was and a likely outcome is a massive decline in global growth. If it is truely affected by Fed policy as it is priced in USD then reversal of this policy should shift the price well below $100.

I prefer the latter scenario as the former will likely greatly help to generate a global economic depression as a result.

[capeman]

If you’re right then oil will be inherently a lot more expensive than it once was and a likely outcome is a massive decline in global growth. If it is truely affected by Fed policy as it is priced in USD then reversal of this policy should shift the price well below $100.

I prefer the latter scenario as the former will likely greatly help to generate a global economic depression as a result.

[capeman]

If you’re right then oil will be inherently a lot more expensive than it once was and a likely outcome is a massive decline in global growth. If it is truely affected by Fed policy as it is priced in USD then reversal of this policy should shift the price well below $100.

I prefer the latter scenario as the former will likely greatly help to generate a global economic depression as a result.

[capeman]

If you’re right then oil will be inherently a lot more expensive than it once was and a likely outcome is a massive decline in global growth. If it is truely affected by Fed policy as it is priced in USD then reversal of this policy should shift the price well below $100.

I prefer the latter scenario as the former will likely greatly help to generate a global economic depression as a result.

[capeman]

If you’re right then oil will be inherently a lot more expensive than it once was and a likely outcome is a massive decline in global growth. If it is truely affected by Fed policy as it is priced in USD then reversal of this policy should shift the price well below $100.

I prefer the latter scenario as the former will likely greatly help to generate a global economic depression as a result.

[HereWeGo]

capeman-
I’m not sure raising the FFR is a necessity. If Ben just starts taking his Treasuries back, even at a deliberate pace, that might be enough.

[HereWeGo]

capeman-
I’m not sure raising the FFR is a necessity. If Ben just starts taking his Treasuries back, even at a deliberate pace, that might be enough.

[HereWeGo]

capeman-
I’m not sure raising the FFR is a necessity. If Ben just starts taking his Treasuries back, even at a deliberate pace, that might be enough.

[HereWeGo]

capeman-
I’m not sure raising the FFR is a necessity. If Ben just starts taking his Treasuries back, even at a deliberate pace, that might be enough.

[Author]

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