Here's the article with the graph: http://www.telegraph.co.uk/finance/economics/8492078/How-the-Fed-triggered-the-Arab-Spring-uprisings-in-two-easy-graphs.html
The main argument of the article is that the uprisings in the Middle East were caused in part by QE2. I could take or leave that point.
My main concern is the first graph in the article, which shows food commodity prices rising 3 to 4 months before the Federal Reserve started purchasing US treasuries.
How can this be if the QE2 is said to be causing inflation and rising prices?
If it is coming to expiry. We still havent said whether or not we are talking furtures, options or index funds. Index funds dont expire.
The index fund in this case is an almagation of futures contracts on commodities (e.g. wheat, coffee, etc.). When the futures contracts expire they renew the position so as to maintain the index fund.
Yeah if its futures. But index funds dont really take supply off the market, they play off the price moves as you seem to understand.
Yes, normally, but see my above comment. This isn't like the typical mutual fund, but an almagation of futures. So when they buy long contracts and don't sell them when the position expires, they take that product off the market (effectively functioning as a purchaser of said product as they hold instead of sell).
Wait, The fed isnt buying treasuries? Which gives the government funds to invest which gets put through Goldman Sachs which goes into speculation?
Yes, at present the fed is buying treasuries and presumably GS, JPM, etc. are purchasing alternatives with the other 95% they didn't have to put down (what exactly they're purchasing at present, I'm unsure of, but I doubt they lack low risk alternatives). The government funds aren't put into the commodity indexes, investor funds are. The banks aren't stupid enough to think a perpetual long position won't eventually go bust (if it goes bust, it's not their money that is lost, it's their customers savings who are lost).
Thank you for clearing that up. Which also clears up the next line. But my question would be, wher does all of that stuff that they took off the market go? To storage?
PS. What a strange product.
So when the reserves at the fed come out, thats when we get real inflation?
I still feel like this government cash makes its way into commodity prices, if by nothing else, the fake wealth it creates, which in turn is invested.
It's strange and genius (in a very sick and perverted way). I'm not sure where the ag-based commodities are going (presumably they have to sell them at some point lest they rot). Tinfoil hat time: They could (maliciously) release it abroad at rock bottom prices to destabalize a foreign market (extremely low prices means farmers and other producers tied to the ag system wouldn't be able to sell their output). While that sounds despicably evil as countless farmers in said region would be terribly harmed, they could gobble up land and/or capital at low prices (which could be converted to growing products for biofuel productions). Or even better, use the unrest that would cause to further obscure why the price is really going up (e.g. oil prices went up because of Libyan unrest). I don't really know what they're end game is, but it certainly isn't in yours or my best interest.
The only one I was able to find information on was what they're doing is with oil (which they are storing presumably to release when the market nears peaking again).
That's my hypothesis. I don't see how a trillion in funds hitting the market couldn't cause serve inflation (hyperinflation is debatable and depends heavily on how fast the money is released).
Another tinfoil hat point: What if they use the precious metals markets as the safe investment vehicle in lieu of T-bills? Put all their money into precious metals and then release the trillion plus in reserves. Precious metal prices would skyrocket as people use them as a hedge against the soaring inflation.
It does, but only indirectly as you described. Hell, I wouldn't be shocked if some of their low-ranking employees are seeing the index's steady rise and putting their own money into it (given they can't ALL be in on it).
I understand and agree with most of what you said.
"Precious metal prices would skyrocket as people use them as a hedge against the soaring inflation. "
Yeah by like 1 thousand gagilllion percent. I just sold all my SLV at 44.50, but I have all my physical silver and my guns.
It kinda looks like the commodity bubble is bursting, when do you get back in ?
Presumably, if you wait for the bubble to burst, you could get in low and then get out before it bursts again (which is probably 5-7 years). I don't know if there's fees that you would incur for pulling your money out (I would hazard a guess of yes, but what they are is a mystery to me).
I think North has a pretty accurate assessment:
Philip M:Here's a pdf of that harpers magazine article:
Thanks for that!
Having looked over the article, I can't find any footnotes or any other hard evidence for what the author alleges of Goldman Sachs. It reads like an editorial.
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.