The third bubble?

For the third time in the past 15 years, the Federal Reserve is trying to perk up a flagging economy by dumping interest rates.

The first time, it led to a massive bubble in stock prices.

The second time, it led to a massive bubble in home prices.

The third time, is it causing a massive bubble in oil prices?

The essential inanity of Fed policy is due to the fungibility of money: you can dump money into the system but you cannot control where it goes. All of this liquidity that the Fed keeps pumping into the system ultimately finds its way to trading desks at Goldman Sachs and others, and those folks are using it to speculate in, among other things, oil futures.

So not only is the Fed's cash infusion failing to stimulate consumer activity in any way (or business investment for that matter), it is directly fueling inflationary pressures through oil speculation.

Just a quick thought for a Thursday morning.