BHP Billiton (NYSE:BHP) Concerned Over Commodity Demand

BHP Billiton (NYSE:BHP) is one of the few companies in the world that is considered a bellwether of the global economy. Essentially that means, how BHP Billiton goes, so will go the economy. It also means guidance from BHP is among the most important in the world, as it does give a snapshot of the global economy as they see it at the moment, and BHP usually sees it as good as anybody does.

With that in mind, BHP said in its most recent earnings report, that they were cautious of the demand for commodities going forward, based on how much governments would implement austerity, which would in many cases determine the demand for commodities and/or raw materials.

There are a couple of different major scenarios playing out at the same time. The first is the austerity measures being implemented in Europe, and the Chinese slowing down their heated up urban property markets, which will have some negative effect on prior estimates of commodity demand.

That doesn't mean there still won't be significant demand, just that the demand will be nowhere near the levels they've been in the recent past.

The second scenario playing out is the recent reminder and commitment from the U.S. government and Federal Reserve that they're willing and able to continue "quantitative easing," i.e. printing money in another attempt to stimulate the economy. It has completely failed, but that isn't going to stop them from continuing to do it again.

Just today the Federal Reserve announced they're going to buy long-term Treasury securities by using the proceeds from sales from their gigantic mortgage-bond portfolio.

As the securities they acquired mature, the Fed said they'll continue to roll them over. In other words, they'll continue to use that money to acquire Treasuries.

What that does is keep the enormous amount of money spread around into the economy.

The question is whether that will help the economy. History, and even the last couple years of history, have proven this is a failed strategy, and it's a giant waste of money.

So when BHP Billiton says they're concerned about the demand factor as it relates to policies of governments around the world, these are the type of things they're looking at.