Correlation of Fed purchases with commodity prices

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Thinkor's picture
Thinkor
Status: Bronze Member (Offline)
Joined: Sep 13 2009
Posts: 32
Correlation of Fed purchases with commodity prices

I saw this interesting chart in Agora's 5-min report.   If you take the correlation seriously, its implication is that when QE2 ends, prices of commodities won't plunge, they'll just flatten out because total Fed purchases will flatten out.   There will even still be a small rise due to the effect of applying MBS principal repayments to purchase more treasuries.  This suggests that it would be a wise course to hang on to your gold and silver (and other commodities) until the Fed decides to get back to its most important business - creating electronic money to transfer the real value of your paper savings to Ben Bernanke's friends.

fed/commodity correlation

Lemonyellowschwin's picture
Lemonyellowschwin
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Joined: Apr 22 2008
Posts: 561
Interesting chart Thinkor . . .

I wonder if Chris or someone else would be willing to comment on the idea that commodities might just flatten out if the Fed ends QE, rather than dropping off.  Me, I dunno . . . 

passantgardant's picture
passantgardant
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Joined: Apr 13 2011
Posts: 22
This is a similar chart

This is a similar chart going back 100 years, showing the same correlation along with a timeline of events impacting the levels of debt, monetary expansion, and commodity prices:

 

National Debt vs Adjusted Monetary Base vs Gasoline Price vs Gold Price

 

The full-size image is at http://passantgardant.com/blog/65-timeline-of-hyperinflation

 

passantgardant's picture
passantgardant
Status: Member (Offline)
Joined: Apr 13 2011
Posts: 22
I've created a new,

I've created a new, condensed version of this chart...

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