Saturday, November 1, 2014
Economy: Quantitative Easing R.I.P
OE didn`t bring inflation, contrary to the claims of the Fed critics. But it had been used as an excuse for many hedge funds and other speculators to buy oil and other commodities. The falling oil prices in the recent weeks may be partially the result of the tapering, the gradual reduction of the monetary stimulus in the past months.
The end of QE is necessary to keep the commodity speculation at bay. A day after the announcement commodity prices plunged: Crude oil (WTI) dripped 1.4%, Gold dropped 2,2% and copper fell 1.4%. Cheaper commodities are a welcome stimulus for the economy, because consumers & companies need to spend less for oil, metals & food. Despite terminating QE the Fed is still committed to extremely low interest rates. Therefore the almost inflation free advance of the US economy should continue.