Very provocative post by Marshall Auerback pointing out the direct link between QE by the USA FED and the ECB, and the price of soft commodities and other real investments.
…Although I have consistently taken the line that QE is totally useless, in effect an accounting trick which does little for real economic activity, I should have at least acknowledged its powers in terms of fomenting casino-like speculation in the financial markets. Mind you, that’s nothing for the Federal Reserve to be proud about, and it is certainly inconsistent with its stated mandate of controlling inflation and promoting employment.
That said, you can lay a lot of the current gyrations in the commodities complex, bonds, equities and currencies at the doorstep of the Federal Reserve. My friend, Michael Hudson of UMKC, has made the same point: “What is to stop U.S. banks and their customers from creating $1 trillion, $10 trillion or even $50 trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1% interest cost?”
This is the game that is being played today as a consequence of the Fed’s embrace of “QE2”. So when the Financial Times warns of a global food crisis, one can put 2 + 2 together and begin to understand the damage the Fed and its perversely Wall Street centric approach to economic policy is doing to our economy… (link to article)
