The Case for Investing in Commodities

The main argument supporting inflation is based on the current prices in the commodity markets. The argument postulates that the massive injections of capital through low interest rates and the government’s active purchase of long term treasuries is debasing the U.S dollar and making our products cheaper on the international market. The logic is sound in assuming that price paid has a direct relation to the exchange rate. However, since 2007, the U.S. Dollar Index is down less than 5%. This doesn’t seem so bad on the surface until one considers that because the U.S. Dollar Index is trade weighted with more than 40% of its allocation going to the Euro, it doesn’t accurately reflect the Dollar’s value against the developing Asian nations and thus, the world.

Read the rest, here.

http://blog.commodityandderivativeadv.com/2010/09/09/bucking-the-dollars-decline.aspx

Andy Waldock of OH 9:25AM September 22, 2010