A couple posts back I mentioned that the financial system was in much better shape than I thought possible... but just because I said I was impressed with Bernake and Paulson's outcome, does not mean that I think the coast is clear.
The new Congress is failing. And failing badly. The savings they engineered from the budget this week is less than the government's weekly deficit spending. We needed something drastic. We got something boring.
There is a big difference between keeping the banks, grocery stores, and gas stations open and putting the U.S. on fiscally sound footing. I never said the later was happening... I said I was impressed that things were not much, much worse, and gave credit where credit is due. The Treasury and the Federal Reserve react to the policy coming out of our elected branches of government. Blaming the guys that run these departments for the sh#! their bosses do is unreasonable. It is successive U.S. Congress' and Administrations that have failed us. It would be better if the Federal Reserve did not exist... but last time I checked it is the law of the land.
I see the connection between interest rates and budget deficits - our deficits are so high that a 1% increase in interest rates increases the budget deficit by $100 BILLION - every freaking year. I do not necessarily make the connection to what is going on in the Agricultural commodities, the grains, the softs, and the meats to monetary policy or even QE2. I mean, perhaps it is.... but WTF is up with grain inventories? Either we can't count and the harvests were not what they were purported, or we consumed a great deal more than the population increase and ethanol production would seem to indicate... but something is f*%$ed up. The the near/front month contracts for the grains market have gone ballistic - 2 to 3 months before we get the corn crop in the ground (wheat is planted in the fall)... so there is no way they have advanced knowledge of next year's crop... I suspect that someone (or one or more countries) is quite concerned about their domestic inventories and are distressed that if something goes wrong with this summer/fall harvest they will wind up like old Uncle Hosni.
The world needs perfect weather in the grain growing regions.