Quote:
Originally Posted by aceventura3
The US dollar dominates the world's banking systems. Other currencies are trivial in comparison. It is US monetary policy that drives the world economy. However, the risks of what the Fed is doing are high because this dominance could change. Very few are expressing the level of concern that we should have. We have to pray that the Fed gets it correct.
Reserve currency - Wikipedia, the free encyclopedia
---------- Post added at 06:49 PM ---------- Previous post was at 06:37 PM ----------
We don't know how the market is going to respond after the Fed stops QE2. The Fed is "flocking" to US bonds artificially keeping interest rates low. the party will end.
While the US has an inflationary posture, China has been acting to control inflation and slow excessive economic growth.
Will the Chinese rise in interest-rates work? And have our politicians lost the plot on overseas aid? | Mindful Money
Also, keep in mind that, in the case of oil on the world market, supply is adequate to meet demand, even given the growth in China and other nations with strong growth. Demand has not driven the price increases. |
It seems so trivial, but let me repeat myself:
commodities are going up in other currencies as well. The FED only controls the dollar. If prices going up were the result of the FED flooding the market in dollars, prices would go up in dollars but not in other currencies. The US dollar is the international currency of trade, but if the cause for increase in prices was the flooding of the market with dollars, then those currencies would also gain in value in an equal amount as to the increase in commodity prices.
I know, I know, your faith based economics tells your gut otherwise. But it is what it is.