500 Year CRB Index (Annual)
I love the mere concept of this chart from Jim Bianco — the CRB Index going all the back to the year 1,450:
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courtesy of Bianco Research
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About now, you may be saying to yourself, “How on earth could anyone find this ancient data — and can it possibly be accurate?”
The answers might surprise you:
The chart uses the following series (plotted monthly):
• 1749 to date: The Wholesale Price Index (now called the Producer Price Index) as calculated by the Bureau of Labor Statistics.
• 1749 to 1861: Statistical Tables of Commodity Prices from: Wholesale Commodity Prices in the
United States, 1700 to 1861, by Arthur Harrison Cole (Harvard University Press, 1938)
• 1749 to 1932: The Warren And Pearson Index of Commodity prices in New York, by George F. Warren and Frank A. Pearson (Wiley, 1933)
• 1782 to 1820: Jeavons Index compiled in 1865
• 1821 to 1929: Sauerback-Statist Index of Commodities in England The following commodity prices (start date): Gold and Silver (1749), Platinum (1938), Copper (1784), Crude Oil (1859), Heating
Oil (1923), Gasoline (1920), Lumber (1890), Wheat (1749), Corn (1749), Soybeans (1914), Cattle
(1749), Hogs (1749) and Pork Bellies (1949).
• 1956/57 to date: The monthly average of CRB BRIDGE futures index as calculated by the Commodity Research Bureau.
• 1450 to 1956: A “Reversed Engineered” CRB using the wholesale/Producer Price Index and 11
commodities as calculated by the Foundation For The Study Of Cycles. (The correlation between
this index and the “real” CRB BRIDGE since 1957 is well over 95%).
Much of this data is available from: The Foundation For The Study Of Cycles.
And yes, it seems to be fairly accurate..
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April 8th, 2010 at 11:30 am
More proof that some people just have a wee bit too much time on their hands :)
So I’m trying to figure out what the spike was about around 1625?
April 8th, 2010 at 11:35 am
great dutch tulip bulb bubble of 1637, note, tulip bulbs were probably not the only bubble forming at the time. It was just the biggest.
April 8th, 2010 at 11:36 am
Is this some sort of tardy April Fool’s joke? Where’s Dead Hobo when you need him?
April 8th, 2010 at 12:09 pm
We could use more people with time on their hands. Fernand Braudel is sorely missed, and Niall Ferguson doesn’t really cut it.
April 8th, 2010 at 12:12 pm
Yes, but what would the price of a Big Mac be over the same time period, adjusted for tastes and preferences, of course? (look it up – Big Mac Index)
April 8th, 2010 at 12:26 pm
The reference point, in 1450 I think should be adjusted for the effects of the fall of Byzantium, 1453. Though Latin (Venice, Genoa) and Turkish trade was brisk, there were likely deflationary conditions at the time due to curtailment of overall Eastern Empire spending.
April 8th, 2010 at 12:34 pm
teraflop Says:
April 8th, 2010 at 12:26 pm
… there were likely deflationary conditions at the time due to curtailment of overall Eastern Empire spending.
reply:
———–
I think you’re overstating the condition. You confuse frugality with cost savings due to occasional plunder.Also, you should consider random influences from plague and the need to use a deflator in those instances.
April 8th, 2010 at 12:43 pm
[...] 500(?!?) years of the CRB Index. (Big Picture) [...]
April 8th, 2010 at 1:05 pm
Look at the volatility beginning during the Industrial Revolution (~1775), it finally flattening out 1950-1975 just in time for the introduction of the Nuclear/Computer/Information ‘revolution’.
April 8th, 2010 at 1:08 pm
blogging hobo:
In addition to plague, there were also the effects due to episodic Crusades. I think rather than a deflator, which in my opinion is more suited for monotonic price movements, that a Jump Diffusion model be applied on a per event basis, to determine a non-linear deflator model without stationarity.
April 8th, 2010 at 1:08 pm
now if you’d only invested a dollar…..
April 8th, 2010 at 1:15 pm
No man, that’s a frikkin’ head and shoulders formation in progress. Confirmed by 1-2-3-4-5 elliot wave. Pestilence approaches. This chart foretells the empty gold and silver vaults that support the precious metal ETFs. 2012 is probably the great commodity reversal due to people realizing their commodity ETF shares are only unsecured assets for metal deposits made of air puffs.
April 8th, 2010 at 1:15 pm
We need sound money! Look – 600 years of inflation!!! It shows that people cannot be trusted with fiat money!!
April 8th, 2010 at 1:16 pm
LOL Dead hobo. I knew you wouldn’t disappoint.
April 8th, 2010 at 1:18 pm
teraflop,
Yes, of course. You are correct and I am embarrassed.
April 8th, 2010 at 1:28 pm
[...] The Big Picture Here Barry provides the evidence for the charts potential accuracy. I’m reasonably confident [...]
April 8th, 2010 at 1:28 pm
Looks like the kind of chart the historian David Hackett Fischer had in his book, The Great Wave (http://tinyurl.com/yf6zhr3), where he describes and analyzes century-long waves of price inflation/collapse and their impact on societies. IIRC he starts in the 13th Century. Fischer certainly writes very well and seems to be a careful historian as far as I can tell: Strongly referenced and highly detailed where necessary, not fading material that might contradict his thesis.
I was initially impressed with Niall Ferguson’s writing but am not so sure of the quality of his scholarship. The few academic historians I’m acquainted with find him unimpressive and I could write that down to jealousy except the way they often express the opinion is interesting: Regardless of their specialty (Political, Military, Economic) if Ferguson is referencing that material they usually say he’s inaccurate or sensationalistic and his main conclusions doubtful but then they’ll often add that they hear he’s more highly regarded in some other area of history.
April 8th, 2010 at 1:39 pm
In what manner are these commodities priced? In Big Mac’s? In gold? Or is gold one of the commodities? How could dollars be used, as they didn’t even exist until the last couple of centuries, and even then, were variously gold- or silver-backed or fiat currency, depending on the whims of the government at the time.
Here’s a viable metric for valuing commodities: Calories. How many calories could you buy (or alternatively, how many did you have to expend) with a basket of commodities?
With productivity enhancements in agriculture and industry, calories became much cheaper over the years, which should be reflected in a chart like this, but obviously isn’t.
April 8th, 2010 at 1:48 pm
just spit-balling here but that sure looks like an expanding triangle complete with a five wave thrust up after it leaving us at today and if that unlikely possibility were true, and the thrust is, in fact, over now it means the index is headed back to 40 again sometime in the next 25 years. Just suggesting this makes me Danny-doom but then we really don’t have to worry, the Fed is in charge. Cool chart.
April 8th, 2010 at 1:56 pm
Priced in Thalers (pronounced kinda like ‘dollars’), about 30g of silver.
April 8th, 2010 at 2:00 pm
Is it just me, or is this < 1% annualized over 560 years?
Hardly would call that inflation.
(post 1945 a different slope of course)
April 8th, 2010 at 2:06 pm
My dollar is worth a millionth of what it used to be back in 1450. :(
April 8th, 2010 at 2:19 pm
wonder how it correlates with population, production gains, transportation changes, and wars thrown in for good measure
of note: 1850 railroads and steam babeeeeeeeeeeeee, peaks at 1875, deflates around oil discovered in pennsilleeeeeevania, and then bottoms in 1900, it’s all about My Name Is Earl, oil boom babeeeee, the life blood of modern society
April 8th, 2010 at 2:41 pm
I have noticed a 100 fold increase in the number of fever charts with wavy lines on them since the Dark Ages.
April 8th, 2010 at 3:20 pm
1450? Really?
April 8th, 2010 at 3:41 pm
I like it.
In a perfect world, this would quiet down the chirping gold bugs regarding the ability of a gold or silver-based currency to halt inflation. Prior to the 1700s, almost all currency was hard currency, with paper money becoming popular only in the late 17th century. As one can easily see, monetary inflation has been with us about as long as VD.
Alas, it’s not a perfect world. But boy-o-boy, did Nixon ever screw things up (apparently). Just kidding, more likely, the inflation from the 1950s to the present has been the result of the twin demons of the ever-expanding federal government, and the ever-expanding military-industrial complex (the two are pretty much joined at the hip). All that growth takes some serious fertilizin’ and what better fertilizer to use than greenbacks?
April 8th, 2010 at 7:19 pm
highly intriguing-
especially considering the following-
“At the peak of tulip mania in February 1637, tulip contracts sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble”
well represented in the chart
April 8th, 2010 at 9:05 pm
Ctrl-P
Place on the office wall right next to Barrys 1930-2010 price of gold in gold chart.
Genuis bunch of comment everyone, Kudos!!!!
April 8th, 2010 at 9:06 pm
In The Great Wave, Fischer points out that Europeans have studied this pricing structure for years, but American historians and economists find it unfamiliar. (He wrote a great book about Paul Revere’s ride when he realized that most European historians had never heard of it.) Economies go through cycles of stability and inflation which was distinguished from famine even back in the middle ages (fames vs cares). The stable periods are sometimes based on hegemony, as when Britain controlled a huge fraction of the world’s markets in the 19th century, and the inflationary periods are often associated with political and structural change. During stable periods, short term problems, like crop failures, result in short term effects with rapid recoveries, but during inflationary periods, they will lead to an inflationary spiral. During the inflations, the prices of natural resources, typically land, fuel and food, rise seriously, but the cost of labor and manufactured goods stays low or even falls.
It’s a great book. More economists should read it.
April 8th, 2010 at 11:02 pm
Where is the Medieval Deflationary Anomaly??
;-)
April 8th, 2010 at 11:19 pm
1450 predates (by three years) the fall of Constantinople — the official end of the Roman Empire.
April 9th, 2010 at 1:05 am
and the unofficial beginning of the renaissance
April 9th, 2010 at 1:49 pm
[...] of readers emailing in this chart from Bianco (via Ritholtz). I’m not going to comment on the validity of the data, but rather, the conclusions. If [...]