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Commodities reach new all-time highs

It's official: the CRB Spot Commodities Index today reached a new all-time high (485), eclipsing the previous high (481) set in July 2008. This can be interpreted in many ways, of course, but let me state the obvious: this is not a symptom of deflation, and this is not a precursor of a double-dip recession. This is unambiguously symptomatic of growth and accommodative monetary policy.

What is amazing to me is that the Fed and so many commentators persist in wringing their hands over the possibility of deflation and a weakening of economic growth when commodity prices continue to move to all-time highs almost every day. I have yet to see anyone come up with a coherent explanation as to how we can be on the verge of deflation and recession when commodity prices are making new highs almost daily.

Commodity prices are measured in virtual real-time. They lie at the intersection of supply and demand across markets around the world. They tell us at the very least that economic activity is not contracting, it is expanding; that the price level is not declining, it is more likely increasing. Commodity prices are not subject to faulty seasonal adjustments, and they are not subject to revision. They are the here and now, and they are booming. And they are being led by gold, which is also at new all-time nominal highs.

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