Comments today from the British Chambers of Commerce highlight the favorable backdrop, in my opinion, for hard assets/commodities as they call on the Bank of England to print more money. Not only do they want the BoE to complete its current asset purchase plan but “they should go beyond 150b pounds” as while the “worst of the recession is over,” “the recovery is not guaranteed.” Considering the benign outlook on inflation many Fed members have, one can assume the Fed’s thinking is along these lines. If the economy gets better from here, commodities will rally and if the economy falters again, central bank money printing goes into overdrive and commodities will likely rally too. Obama’s CEA head Rommer last week said “we’ll do whatever it takes to help the economy,” aka, more spending and thus more borrowing. Thus, as long as the mentality of policymakers remains ‘we need to do something,’ they will not stop until the economy gains traction. The euro is back above 1.40 vs the $ after German factory orders rose much more than expected. European bonds and Treasuries are lower in response with the 10 yr bond yield rising to near a two week high ahead of more supply this week.
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