commodities are an absolutely lousy benchmark for monetary policy . . .
In its annual World Energy Outlook, the International Energy Agency also predicted that oil prices would nearly double in real terms by 2035, from just over $60 per barrel in 2009 to $113 per barrel. The projected price increase, which is adjusted to eliminate the effects of inflation, reflects a growing demand for cars and airplanes against the backdrop of reserves that will be increasingly difficult to reach. . . .
China is expected to continue to drive growth in energy demand overall as its industrial production increases and its population grows . . . Demand for energy in China is expected to rise 75 percent by 2035
Apparently we're to believe that the proper role of the Fed is to tighten U.S. monetary policy and reduce domestic demand to keep commodity prices stable. But to do this, we'll have to reduce our demand by at least as much as China's demand grows. The main beneficiary of such a policy, of course, is China, who can continue to grow unfettered, but, by virtue of a self destructive monetary policy in the U.S., can realize the same growth with lower commodity costs. Meanwhile, our GDP will be forced lower by roughly the same amount as China's GDP grows. Brilliant.