Speaking of the US dollar and of its prospects to continue buckling under the pressure engendered by surging commodities (or, is it the other way around?), Fed President Janet Yellen reaffirmed the position taken by her institution that the current spike in “stuff” is transitory in nature and that it will not have long-lasting consequences on US growth, or on US inflation. Ms. Yellen not only exculpated the Fed from being responsible for the commodity bubble currently in progress, but also pointed to the fact that the values in that niche have leapt far higher than would be justified by the decline in the dollar.
The greenback has fallen roughly 10% since last summer, while certain commodities (can you say: silver?) have spiked anywhere from 40 to 70 percent or more. Ms Yellen, as if taking a page from this recently-published book, categorically defused perceptions that the Fed will somehow lose control of the process and allow inflation to spiral away in a fashion similar to the 1970’s.
On another factor that has been instrumental in bringing about aggressive US dollar selling in recent times, the US deficits, there appears to be further progress being made in Washington. American lawmakers have reached agreement on $38 billion worth of cuts to the federal budget for the remainder of this year. Details will be on offer in President Obama’s speech to the nation, scheduled for tomorrow evening. Targeted for the budgetary scalpel are agencies such as the EPA, the NIH, and programs such as high-speed rail and law enforcement.
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America