Scott Sumner Wrong On Monetary Policy & Commodity Prices

Scott Sumner makes the rather astonishing assertion that "In fact, monetary stimulus raises commodity prices if and only if it raises expected future output. There is no other mechanism.".

Actually, there are at least two other mechanisms, First of all, the fact that commodity prices are extremely flexible (they go up and down every minute) whereas many other prices, including the price of labor (aka wages or salaries) are "sticky". This means that commodity prices will react immediately to more "monetary stimulus" while the more sticky prices will react months or years later, causing a relative price reduction of the sticky prices at least in the short term.

And secondly, there is the thing called exchange rate. If what Sumner refers to with the euphenism "monetary stimulus" in the U.S. causes the dollar to drop in value, then the price of commodities in terms of euros, yens, pounds etc. will fall given a certain dollar price. The resulting increase in demand and reduction in supply from outside the U.S. will cause the dollar price of these commodities to increase.

One would have thought that Sumner as an economist would have heard of the flexible/sticky price distinction and of currency exchange rates. And he probably has, but he has failed to realize that they are two mechanisms in which monetary policy can raise commodity prices without raising real output.