Commodities Crater

It was probably a particularly bad week for Ben Bernanke -- not because of the drop in equities or the continued confusion in the eurozone but rather because of the sharp decline in commodities prices. The Chairman is a student of the Great Depression and a deflation hawk and, no doubt, shuddered when he saw across-the-board selling in the broad commodity sector. It was a concern of his in a November 2002 speech before the National Economists Club in Washington, D.C., when he outlined a three-pronged approach to combat its first signs:

Phase 1 of the plan was for the Fed to buy shorter-dated maturities. Phase 2 was to extend the strategy to maturities further out on the curve. Phase 3 was to buy foreign government debt.

The speech outlined his quantitative-easing policy to date and suggests future action to deal with the spread of the potential eurozone contagion. ...502 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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