Commodity-Driven Inflation Isn’t Transitory If Surge Continues (Fed Didn’t Mention M2 Money Surge Or Crashing M2 Velocity)

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by confoundedinterest17

The Bloomberg Commodity Index is up 20% this year and on pace for its best year since 2003. This surge has not only fanned inflation fears, but it has created a bullish breakout in the long-term Bloomberg Commodity Index. As shown in the chart below, that points to more gains ahead for commodities overall. Should this occur, it could support the idea that inflation is more than transitory.

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Here is a colorful chart showing (in green) one-month changes in prices, led car and trucks and energy.

Iron ore is rising today while gold and silver are falling.

Odd that The Fed didn’t mention M2 Money and M2 Velocity yesterday. Well, M2 Velocity (GDP/M2 Money) has crashed as M2 Money soared due to Covid.

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Then again, The Fed is chowing down on US Treasury debt and Agency MBS.

Most of The Fed’s Treasury holdings (green) are short-term while agency MBS (yellow) are longer-term.

 

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