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Kudlow channels Knut Wicksell. "Wicksell’s monetary model is a simple one. When the central bank’s policy rate is placed above the economy’s so-called natural rate, then money is tight. When the rate is set below the economy’s potential to grow and invest, then money is easy. Confirming this, commodity prices (including gold) will rise or fall depending on central bank policy. Over the past year the pronounced rise in commodity prices and the fall in the dollar have been signaling that excess money from the Fed has created a mild inflationary potential. That Alan Greenspan has apparently decided to remove some of this liquidity excess is a good thing and a prudent decision .. ". More Larry Kudlow. Posted by Greg Ransom | TrackBack