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Evil Bernanke printing $$$ is causing inflation, evil man!!!...... or ... not?



January 27, 2011 – Comments (18)

I would like to offer up a thought and maybe spark some discussion. 

The component of investors most vocally and profoundly opposed to Bernanke, the fed, QE, QE2, "money printing", and more thinks like this:  all this "money printing" will cause huge inflation, the best way to hedge against inflation is by buying commodities like gold and oil, so buy those.  They hate bernanke and rail endlessly against him and his practices and point out that inflation is rampant:  just look at commodity prices.  

Then margin-limits on commodities are changed, and...

gold and oil are down 10% (or close) in an instant.  

So what is causing the rampant run-up in commodity prices and the cost-push inflation it forces?  Bernanke or the speculators that hate him?  

Is all that "money printing" causing this, or is it being caused largely by market speculation on an abnormal scale (presumably some commodity speculation is always present) by the very people who hate inflation the most?  It is certainly a popular, and crowed (probably record-crowded, historically) trade - long commodities.

Is it Bernanke, or is it th anti-Bernanke crowd that are causing the commodity inflation we've seen?

18 Comments – Post Your Own

#1) On January 27, 2011 at 7:56 PM, checklist34 (98.65) wrote:

on other notes:

1.  the mega-PE stocks I hate, and mentioned my desire to short earlier this year, are finally getting pounded a bit.  most seem to tank after earnings...

2.  I think my mistake in expecting a correction early in the year was that EVERYBODY was expecting one, meanin it couldn't come

3.  I just spent a week sick with the bird flu.  worst thing ever.  shaking cold and can't warm up even with the house at 80 and sweatpants/sweatshirt and wrapped in blankets.  Sweat every time you sleep to the point that you wake up with clothes so wet you can literally wring them out (I bet I sweat 2 gallons in the last 7 days).  Weak, tired, fatigue, and now I have a cough (although the rest of it is generally better).  

At least I am apparently going to be immune if we ever get a bird flue pandemic.  It kills a good % of people that get it.  Checklist hates hospitals so just went for a diagnosis after it was more or less over.  Then the hospital staff panic at you and ask WTF you were thinking not coming in.  And then you go home.

4.  I am not a buyer of this market right here

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#2) On January 27, 2011 at 7:57 PM, ChrisGraley (28.61) wrote:

It's Ben

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#3) On January 27, 2011 at 8:06 PM, bigcat1969 (80.92) wrote:

I think its a natural reaction to several factors such as investors chasing a new bubble at a time when bigtime profits can be hard to come by, third and second world countries having the ability to consume more and moving up toward 2.5 and 1.5 status as nations and possible wheat or other shortages.

Glad you are better got a nasty virus a few year ago that laid me out for almost two months.  Not fun!

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#4) On January 27, 2011 at 11:19 PM, SockMarket (34.35) wrote:

Congrats on surviving the bird flu!! 

Just curious, what do you think the market will do from here on out? 


as for bernanke:

this is kind of like saying that it is your hand's fault for knocking something over. Not yours for telling it to move there. 

Just so Bernanke's job is to predict and direct the markets. The people doing the trading are the people his actions are intended to affect. This is what is supposed to happen in a functioning market and is a direct consequence of his actions.

just sayin...

BTW I do think bernanke is doing a pretty good job, although QE2 isn't really my favorite move.  

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#5) On January 27, 2011 at 11:52 PM, awallejr (28.16) wrote:

It's emerging market demand for commodities.  You would have to expect that.  If they are emerging and growing they will put demand pressure on finite resources.  PMs on the other hand can rise for several reasons (demand, inflation, fear).

I suspect Bernanke is hoping to spur high enough growth which would bascially absorb the ultimate inflation.  But if it really is a commodity demand play with little wage growth, then stagflation here we come.

P.S. keep the AC on and sleep under blankets, you won't sweat.

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#6) On January 28, 2011 at 12:45 AM, Mstinterestinman (< 20) wrote:

Just my opinion but its mostly speculation and partly Ben. Congrats on surviving. I bought two new positions today COCO because its dirt cheap and imo the hit to sales and earnings wont be as severe as expected. Also Netflix I don't like the valuation but the herd are chasing it higher and when the herd started buying something I can see it lasting for a while. Also when you get a chance check out the blog for my pro Ozzfan1317 and let me know your thoughts.

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#7) On January 28, 2011 at 9:54 AM, russiangambit (28.86) wrote:

Low interest rates fuel speculation. I don't know who and why would argue with that. Unnatural low interest rates cause the money look for return elsewhere -emergining markets, commodities, they create distrotions and bubbles.

It is not just Bernanke who is evil but most of the FED, most of the US establishment and government. They are  trying to preserve the way of life that "used to be" instead of explaining to US irate population that it is gone forever and letting the imbalances correct. The deflation that they are fighting so hard is the only way to correct the present imbalances, but it is not allowed. Of course, I understand that telling US people to accept lower standrd of living will not fly after years and years of bending the truth and living on the premise that americans are somehow superior to other nations and will pull through it undamaged unlike other nations. But at some point somebody has to start telling the truth  while also doing damage conotrl and trying to dealy the unraveling so that it is not as sharp. But what FED and Treasury doing now is madness. They are not more powerful than free market, going against free market forces can delay the effects somwhat but also increase the risk of  a spectacular blow out later on unless managed very very carefully.

OK, enough ranting. FED needs to raise interest rates to at least 2% pretty soon to get the situation under control. Chances of them doing it? Close to zero.

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#8) On January 28, 2011 at 10:03 AM, whereaminow (< 20) wrote:

In the long run, the stock market we play on only rises on money printing.

It's up 90%

David in Qatar  

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#9) On January 28, 2011 at 12:48 PM, paperpump wrote:

whereaminow, Is this your own thesis or have you read this somewhere? If so, where??

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#10) On January 28, 2011 at 12:54 PM, whereaminow (< 20) wrote:


See here.

David in Qatar 

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#11) On January 28, 2011 at 1:06 PM, TheDumbMoney (78.75) wrote:

I suggest that everyone on this thread read these links and the comments in full:

See hereHereHere.  And if you don't read any of those, read this, including as many of the links it attaches as you have time to read.

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#12) On January 28, 2011 at 4:43 PM, fireman9119ca (89.38) wrote:

Sorry CL for off topic but I think you would enjoy this documentary


 It is part 3 of 3

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#13) On January 28, 2011 at 7:58 PM, Borbality (38.70) wrote:

well hey, if the market rises on inflation, we'd be crazy not to get in on it, right? that somehow always makes me feel a little better.



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#14) On January 29, 2011 at 11:56 PM, checklist34 (98.65) wrote:

fireman, i'll check it out. 

borb, the market, historically, has always eventually risen to incorporate past-inflation, so has always risen with inflation.  It, not gold, has been historically an actual store of value.


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#15) On January 29, 2011 at 11:57 PM, checklist34 (98.65) wrote:






thanks everybody for the comments

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#16) On January 31, 2011 at 11:37 AM, russiangambit (28.86) wrote:

#15 -  the post wasn't just about QE but overall FED policy. QE isn't inflationary, I agree. It is more along the lines of "misguided". The rest of the FED policies are inflationary. Even FED themselves acknowledges that they want inflation, even if it is artifical to counter the deflation.

As for the evil part, I guess it depends on your definition. We can rephrase it as "criminally negligent", is this better?

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#17) On January 31, 2011 at 12:02 PM, AvianFlu (< 20) wrote:

Boy, there are a lot of people here who really need to read some Milton Friedman.

Inflation is caused by increases in the money supply.

Not speculators.
Not greedy unions.
Not other nefarious countries.
Not greedy retailers.
Not socialism.
Not capitalism.

Lag time between inflating money supply and consequent price inflation is about 2 years plus or minus. The onset of inflation today roughly corresponds with the onset of QE1. Our little party is just beginning.

When things get really bad you will hear the "usual suspects" above denouced all the time...unfairly.

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#18) On January 31, 2011 at 7:19 PM, sentinelbrit (57.53) wrote:

I think we are all fooling ourselves. I got to thinking about the downfall of communism and how the West said the system was basically bankrupt - much of what it produced was outdated, the stores were half empty of produce, people were employed in phantom jobs producing things that were sold within the communist bloc because no one else would buy them, unemployment was artificially low because the government employed people to push paper etc... The only way the West has kept going through the last few years is thanks to the government and the printing press at central banks around the world. We continue to live way beyond our means and it will ultimately catch up with us. The politicians in this country will never dish out the medicine needed because it is political suicide - because the people don't want to take the medicine. I'm not normally a pessimistic guy but I fail to see how the economy can grow when the punch bowl will either be take away or the punch will evaporate through the course of time.

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