Reply #27: temporary [View All]

[Hawkowl]

Look, commodities have followed the same exact pattern as all bubbles. Trace it back to the first bubble phenomenon, the Tulip bulb craze of the 17th century. All price bubbles follow this pattern. From the tech stock bubble, to the real estate bubble. The price graph looks like a bubble, thus the term. To complete the bubble pattern, the price must return to pre-bubble inception price. The commodities price bubble has been fueled by rampant speculation and money that no longer exists. First, Congress tightened speculation regulations in the Farm Bill passed in June. That is when oil began its slide. Second, TRILLIONS of dollars have been lost in the mortgage derivative/insurance market. That market has yet to be stabilized--i.e; money is still being lost and commodity positions are being liquidated to prop up reserves.

Advanced monetary economics dictates that as money is removed from the system prices MUST fall. This is Bernake's fundamental guiding principle. He believes that the 1930's exacerbated the Great Depression with a tight money policy and is determined to avoid this mistake. Hopefully he can succeed in the medium term. In the short term, prices will fall.