MICHAEL DRURY Jan 1411

Monetary Policy and Central Banking in the Post Crisis Environment

Is Monetary Policy Causing Commodity Inflation?

Central Bank of Chile and Global Interdependence Center Santiago, Chile Jan 17, 2011 Past Performance Is Not Necessarily Indicative Of Future Results.

0

US M2 vs CHINA M2 11%

30%

9%

26%

7%

22%

5%

18%

3%

14%

1%

10%

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Sources: US Federal Reserve and The People’s Bank of China

Jan-06 US M2

Jan-07

Jan-08

CHINA M2

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-09

Jan-10

Nov 2010 1

CHINA YUAN IN US DOLLARS 0.16

0.15

0.15

0.14

0.14

0.13

0.13

0.12 Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Source: Bloomberg BGN

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-09

Jan-10

Jan-11

Dec 2010 2

TOTAL PCE DEFLATOR VS CORE PCE DEFLATOR 3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

-1.0%

Jan-83

Jan-87

Jan-91

Source: Bureau of Economic Analysis

Jan-95

TOTAL

Jan-99

Jan-03

CORE

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-07

Jan-11 Nov-10

3

FOOD CPI VS ENERGY CPI

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO 30.0%

7.0%

6.0% 20.0%

5.0%

10.0% 4.0%

0.0%

3.0%

2.0% -10.0%

1.0%

-20.0% 0.0%

-30.0% Jan-82

-1.0% Jan-86

Jan-90

Source: Bureau of Labor Statistics

Jan-94

ENERGY

Jan-98

Jan-02

FOOD

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-06

Jan-10

Nov-10 4

TOTAL PCE DEFLATOR - CORE PCE DEFLATOR 3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

2.0%

1.5%

1.0%

0.5%

0.0%

-0.5%

-1.0%

-1.5%

-2.0%

-2.5% Jan-83

Jan-87

Jan-91

Jan-95

Jan-99

Jan-03

Source: Bureau of Economic Analysis

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-07

Jan-11 Nov-10

5

GDP DEFLATOR VS CORE PCE DEFLATOR CURR QUARTER %CH FROM YEAR AGO

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% Mar-00

Mar-01

Mar-02

Mar-03

Source: Bureau of Economic Analysis

Mar-04

Mar-05

GDP DEFLATOR

Mar-06

Mar-07

CORE PCE DEFLATOR

Past Performance Is Not Necessarily Indicative Of Future Results.

Mar-08

Mar-09

Mar-10

Q3 2010 6

CRUDE OIL IN US$ Dollars per barrel

160

140

120

100

80

60

40

20 1/6/2006

1/6/2007

1/6/2008

1/6/2009

Source: Bloomberg

Past Performance Is Not Necessarily Indicative Of Future Results.

1/6/2010

Dec-31-2010 7

CORE CPI MEASURES

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO 6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

-1.0%

-2.0%

-3.0%

-4.0% Jan-00

Jan-02 Source: Bureau of Labor Statistics

Jan-04

CORE SERVICES CPI

Jan-06

Jan-08

CORE CPI COMMODITIES

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-10

Nov-2010 8

US SINGLE FAMILY HOUSING STARTS VS US CAR SALES MONTHLY, MILLIONS OF UNITS

2.3

22

2.1 20 1.9 18

1.7

1.5 16 1.3 14 1.1

0.9

12

0.7 10 0.5

0.3 Jan-00

8 Jan-02

Jan-04

Sources: US Census Bureau and Bureau of Economic Analysis

Jan-06

Jan-08

US Single Family Housing Starts

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-10 US Car Sales

Nov-2010 9

CORN IN US$

Dollars per bushel

7.5

6.5

5.5

4.5

3.5

2.5

1.5 1/6/2006

1/6/2007

1/6/2008

1/6/2009

Source: United Stated Department of Agriculture

Past Performance Is Not Necessarily Indicative Of Future Results.

1/6/2010

Dec-31-2010 10

GLOBAL GRAIN STOCKS: DAYS OF CONSUMPTION 140

120

100

80

60

40

20

0

Sources; Historical Data: USDA 10/11 Projection: McVean Trading & Investments

COARSE GRAINS

Past Performance Is Not Necessarily Indicative Of Future Results.

WHEAT

RICE 11

US PRODUCTION OF TOTAL RENEWABLE FUEL Billions of Gallons

38.00

33.00

28.00

23.00

18.00

13.00

8.00

3.00 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: US Department of Energy

Past Performance Is Not Necessarily Indicative Of Future Results.

2018

2019

2020

2021

2022

Actual through: 2010 Forecast through: 2022 12

CHINESE GDP

CURRENT QUARTER %CH FROM YEAR AGO 30

25

20

15

10

5

0 Mar-02

Mar-03

Mar-04

Mar-05

Source: National Bureau of Statistics of China

Mar-06

Mar-07 REAL GDP

Mar-08

Mar-09

NOMINAL GDP IN YUAN

Past Performance Is Not Necessarily Indicative Of Future Results.

Mar-10

Q3 2010 13

CHINA TOTAL BANK LOANS VS CHINA M2

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

35%

30%

25%

20%

15%

10%

5%

0% 1/1/2000

1/1/2002

1/1/2004

Sources: China Economic Information Network and The People’s Bank of China

1/1/2006 BANK LOANS

Past Performance Is Not Necessarily Indicative Of Future Results.

1/1/2008 M2

1/1/2010

Nov 2010 14

CHINA EXPORTS VS IMPORTS

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO 80%

60%

40%

20%

0%

-20%

-40% Jan-00

Jan-01

Jan-02

Jan-03

Source: China Statistics Monthly

Jan-04

Jan-05 EXPORTS

Jan-06

Jan-07

Jan-08

IMPORTS

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-09

Jan-10

Jan-11

Dec-10 15

CHINA RAILROAD FREIGHT VS ELECTRICITY PRODUCION 3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0% 1/1/2000

1/1/2002

1/1/2004

Sources: China Economic Information Network

1/1/2006 RAIL

1/1/2008 ELECTRICITY PRODUCTION

Past Performance Is Not Necessarily Indicative Of Future Results.

1/1/2010

Oct 2010 16

COPPER IN US$

Dollars per metric ton

10000

9000

8000

7000

6000

5000

4000

3000

2000 1/6/2006

1/6/2007

1/6/2008

1/6/2009

Source: London Metal Exchange

Past Performance Is Not Necessarily Indicative Of Future Results.

1/6/2010

Dec-31-2010 17

COTTON IN US$ Dollars per Pound

160

140

120

100

80

60

40 1/6/2006

1/6/2007

1/6/2008

1/6/2009

Source: United Stated Department of Agriculture

Past Performance Is Not Necessarily Indicative Of Future Results.

1/6/2010

Dec-31-2010 18

GOLD IN US$

Dollars per ounce

1600

1400

1200

1000

800

600

400 1/6/2006

1/6/2007

1/6/2008

1/6/2009

Source: Bloomberg BGN

Past Performance Is Not Necessarily Indicative Of Future Results.

1/6/2010

Dec-31-2010 19