In the wake of the recent third round of quantitative easing (QE3) by President Obama’s Chairman of of the Federal Reserve Bank, Ben Bernanke, commodity prices have actually eased. In one respect this is good because it represents a potential cost savings to American consumers. However, to many observers, this also signals a failure of QE3 to stimulate the economy – an effect that the administration had hoped would assuage fears that another recession is looming in spite the massive borrowing designed to breathe life into an pre-election economy that appears stagnant at best.
Since we follow commodities here, let’s take a look at how commodity futures prices have change since the day Obama took office. In most cases, the recent price declines have still left commodities at levels far above those in January 2009 when Obama took office. The following table provides a sample of change during the Obama administration from January 19, 2009 to September 30, 2012 for several key commodities …
- Gasoline, was 1.1544, now 2.9180. Up 152.77 %.
- Corn, was 390.5, now 764.5. Up 95.77 %.
- Cattle, was 82.675, now 122.075. Up 47.66 %.
- Coffee, was 119.65, now 173.50. Up 45.01 %.
- Sugar, was 12.70, now 20.42. Up 60.79 %.
- Cotton, was 0.5064, now 0.7065. Up 39.51 %.
- Lumber, was 151.00, now 279.00. Up 84.77 %.
Feeding corn to humans and animals or making ethanol and other corn-based products costs almost 100 percent more. Eating beef costs almost 50 percent more. Your morning coffee has jumped 45 percent and, if you want to put sugar in it, that’s another 60 percent increase. Clothes made of cotton cost more and, if you want to build a house, lumber prices have grown by 85 percent. Every change was a substantial price increase. Many of these higher commodity prices have yet to work themselves into the consumer price index.
As President Obama struggles to get his 2008 Mojo back during a period of high unemployment and massive debt, the American middle class, which even Joe Biden admits has been “buried” during the past four years, is faced with these higher commodity prices while suffering a decrease in household income. The specter of an opponent with an exemplary record in private business must obviously be a huge concern to the president who is looking more and more like Jimmy Carter, the “stagflation” president. The big elephant in the room is the ridiculously low interest rates. If they ever go up again – and they will – our $16 trillion in debt will look like peanuts and the fiscal cliff will look more like a fiscal abyss.