The Wall Street Journal takes a stab:
Another suspect—one Mr. Obama doesn’t like to mention—is U.S. monetary policy. Oil is traded in dollars, and its price therefore rises when the value of the dollar falls, all else being equal. The Federal Reserve throughout Mr. Obama’s term has pursued the easiest monetary policy in modern times, expressly to revive the housing market. It has done so with the private support and urging of the White House and through Mr. Obama’s appointees who are now a majority on the Fed’s Board of Governors.
Oil staged its last price surge along with other commodity prices when the Fed revved up its second burst of “quantitative easing” in 2010-2011. Prices stabilized when QE2 ended. But in recent months the Fed has again signaled its commitment to near-zero interest rates first through 2013, and recently through 2014. Commodity prices, including oil, have since begun another surge, and hedge funds have begun to bet on commodity plays again. John Paulson says he’s betting on gold, the ultimate hedge against a falling dollar.
Fed officials and Mr. Obama want to take credit for easy money if stock-market and housing prices rise, but then deny any responsibility if commodity prices rise too, causing food and energy prices to soar for consumers. They can’t have it both ways, as not-so-stupid Americans intuitively understand when they buy groceries or gas. This is the double-edged sword of an economic recovery “built to last” on easy money rather than on sound fiscal and regulatory policies.
Let´s take a look at the “evidence” for all those claims.
If they´re trying to revive the housing market, they´ll have to “try harder”. The C-S chart for National House Prices does not indicate a “revival”.
The next chart plots the broad US dollar exchange rate (trade weighted against a broad set of trading partners) and oil prices on a weekly basis since January 2008. For the last 12 months oil prices have fluctuated little while the dollar is at the same level of one year ago, higher than a few months ago and at the same level it was in early 2008.
And if monetary policy is “so easy”, why is nominal spending still “comfortably tucked inside the hole”?
So when the WSJ talks about “surges” in oil and commodities at present and “easiest monetary policy in modern times” it is surely “exaggerating”!
My preferred commodity price “story” is told by the chart below, taken from a post of one year ago.
Yes, China in the WTO made a “world of difference”.