Increased demand has pushed commodities prices higher; what is interesting is the role speculative demand has played. Which ever way you look at it, increased resources costs will lead to higher prices. You don't need a textbook to get that. Treasuries are much lower why? Might they be pricing in much poorer growth? I think it's really intersting that commodity prices and yields are diverging. What would happen if the speculative bubble were to burst (and speculators actually reverse short?). Deflation? Just throwing some ideas out there.
The way this is playing out seems to support the thesis that the problems in the economy are that of excessive risk taking not a shortage of liquidity. What happens if the securities the fed is now accepting as collateral are defaulted upon?
Likely the Fed will just say, "fuggetaboutit"... just another way to "monetize bad debts"... could be their intention right from the get-go.
I think we can add another statement of fact to the litany of facts we've learned in the last several months, and it's quite simple - The Federal Reserve, if there was any previous doubt, has lost any semblance of credibility it previously held among the remaining (but dwindled) faithful. I mean, they just can't provide support no matter what they try. Maybe because that's not their proper role - to support financial markets. Maybe they should let the weak actors, who made the wrong choices, fall on their swords, and allow the underpinnings that the healthy and wise actors are now establishing, take us into a new bullish phase eventually, once the toxic waste works itself out of the markets (however low that takes us).