Very true. Low interest rates typically coincide with low commodity prices (i.e. input prices) but you have to remember that Fed hasn't only lowered rates, it is in the process of injecting another $105B (by December) of fresh debt into the market. As such, people are expecting costs (and prices in general) to go up because of the excess debt accumulation.
As far as the U.S trying to become an export economy. I cannot phantom how that would happen, when the U.S consumer is clearly the biggest consumer out there. I think China will have to be become net importer for the U.S to become a net exporter. Otherwise, world trade would collapse.
I doubt that that's what the Fed's real intentions are (perhaps they want the U.S to be more competitive on the export market, but not become a net exporter).
I tell you one thing though, with the debt deleveraging that is currently going here in the States, the Fed must counteract out with higher commodity prices to avoid deflation. There is no question commodity prices are going to still elevated for quite some time. The question is, how high is too high, and how long is too long? There is a very thin margin (fine line) between an asset class bubble and a cyclical bull market.
Originally Posted by Mr. Winky
Heh. I find it funny... I'm not too sure how the Fed is tackling this. But in the past 30 years or so, I know low interest rates usually coincide with lower commodity prices. This isn't the case right now.
But with such a low US Dollar, I wonder if the US is trying to become an export economy? I'm not too sure how that is going to work, to be honest. Considering that exports only account for 12% of its GDP. I know, up here in Canada, we did that during fiscal hardships but it was different (and it worked) because our exports make up a substantial amount of our GDP (>25%, I believe). If I remember correctly, consumption in the US account for 71%? Heh. I sure hope the US aren't trying to become exporters, not too sure how that would fair out.