More on Commodity Price Inflation

I think this quote sums up my concerns over the expectations for Quantitative Easing II (QE II) currently being considered by the Federal Reserve:

"... commodities are up across the board, from the grains to crude oil. I noticed gasoline jumped 15 cents a gallon between my fill-ups. Rising costs for these necessities reduce consumers' discretionary-spending power and could backfire if they crimp the economy, as they did in 2008 well before the failure of Lehman Brothers."

Foysyth, Randall W., 2010. Chicken soup for the economy's soul? Barron's, Oct. 13.

Much of the fiscal and monetary policy stimulus efforts went into various types of investment, and both the stock (since Mar. 2009) and bond markets have recorded impressive gains without a corresponding boom in economic growth or job creation. Now it appears that QE II will cause an increase in the price of commodities without much impact on the wider economy.

I am concerned that stock, bond, and commodity prices might all increase at the same time, causing an unsustainable situation.

Maybe there is there is too much government intervention!

When the Fed buys bonds and injects money into the financial system, investors are purchasing commodities thus driving prices up. In turn, this lifts the stock market as price increases for materials tend to drive up the value of mining and other industries.