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Source: Bianco Research, LLC
Charts Of The Week, September 21, 2011

Category: Commodities, Data Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

20 Responses to “Reuters/Jefferies CRB Index Back to 1749”

  1. Aside from the obvious rise and the change in the rate of that rise…

    What’s most interesting is the seeming regularity of periods of price volatility followed by stability…

    And how that base level of prices was fairly constant until 1933… (likely related to changes in gold’s role?)

    BUT… importantly… the pattern of stability followed by instability continues!

    What this might at least suggest is that there are problems in ‘money technology’ that are very independent of the endless ad nauseum arguments that either a return to the ‘gold standard’ will fix everything… or that a ‘wise’ FED can engineer a Goldilocks economy.

    Not saying I’ve got the answers but unlike politicians and economists I don’t pretend to either. We might all be better off if we admitted that there are no perfect ideological fixes.

    Economies aren’t “money”… economies really come down to simple things like what people are doing individually and as a group within the constraints of the environment. Money is more like the hammer used to build a house… but its the house that’s the thing we want to build.

    Decision Technologies: Currencies and the Social Contract

  2. machinehead says:

    Given that the CRB only began in 1956, the earlier portion of the chart is stitched together from wholesale price indexes (back to early 20th century), and old records of mostly agricultural crop prices before then.

    Prices in 1933 were almost identical to those in 1776. Then Frank ‘Big Gov’ Roosevelt and an accommodative Fed irrevocably changed the formerly flat secular price trend of centuries.

    Fiat currency is institutionalized fraud: designed to tranquilize the masses with money illusion, as the money lenders profit from the confusion.

  3. rd says:

    The peaks coincide with wars with the actual peak occuring late in the war or shortly afterwards.

    The secular rise over the past 80 years came from the major moves related to de-linking the US dollar from gold leading to structural inflation.

  4. I agree with machinehead that fiat currency controlled and issued by Central Banks and/or governments not surprisingly ends up corruptly concentrated in those creating that money…

    But the problem of oligarchy won’t be solved by a return to the gold standard where it thrived just fine over the centuries…(though I’d agree with Ron Paul that gold should be allowed to operate as money, I’m a fan of competing currencies.)

    The problem seems to me to be in the mechanisms and politics of credit creation and how its introduced into the economy.

  5. gkm says:

    When did social programs really get going in the US? Could it have been say around the 1930′s?

    If you have a scheme where you hand out checks on a regular basis with the intent to receive more money in in the future to pay for that, what would you call that? And if you intend the means of expropriation to be via inflation rather than via fund inflows – does that make it any less of a Ponzi Scheme?

    Find me a better term for a system that is obviously not intended, on its current course, to ultimately match inflows with outflows but needs inflows to maintain the illusion for a little while longer. Stare at the above chart for as long as necessary, look up as many definitions as needs be, and in the end miss the point while getting caught up in the verbage rather than the nuance of a concept.

  6. wunsacon says:


    From 1949 through 1968, we had the same policies FDR implemented in the 30′s. Yet, prices remain stable. Why? And why do prices start rising again in ’68?

    Almost everywhere in this graph, I see “war shoots”, during the later stages of war or right after. That’s what I see in these ink blots. What do you see?

  7. jlj says:

    Looking at the chart, not reading the dates, looks like the chart takes off in early 1970′s. Oil, Gold, silver??? and then we are off to the races.

  8. machinehead says:

    wunsacon — CPI was up 46.22% from 1949 to 1968.

    Commodities are volatile and can fall even when the general price level is rising … as they also did from 1980 to 1999, while CPI was rising by 102.2%.

  9. rktbrkr says:

    The peaks coincide with wars with the actual peak occuring late in the war or shortly afterwards.

    The secular rise over the past 80 years came from the major moves related to de-linking the US dollar from gold leading to structural inflation.

    Wars have been a pretty consistant companion the last 80 years especially once wars became delinked from the Constitutional requirement to declare wars.New wars but no new taxes to pay for the wars, war taxes would be a deal killer, why do that when you can just “borrow” from SocSec and then reneg on the entitlement payments in the future.

  10. GeorgeBurnsWasRight says:

    While the chart is fun, I’m not sure how valid comparisons are between recent decades and periods going back several centuries. I quick check showed that the index was mostly AG products back in 1974, with the exceptions being Copper, Platinum, Plywood (later Lumber) and Silver. Crude Oil and Gold weren’t added until 1983, gasoline and heating oil in 1992, natural gas in 1995, and aluminum in the “current” asset list.

    I’m not sure how they have adjusted for the impact of OPEC, for example. And while I’m not a farmer, and don’t even play one on TV, I’m pretty sure that farming in 1749 is rather different from farming in 2011. Likewise, I’m not sure what copper was mostly used for in 1749, but I know it wasn’t for electrical wiring. I can’t see how they can adjust for all the changes in technology and economies in general over 260+ years. If they haven’t, then this chart is flawed, and if they have, then their assumptions are likely flawed, so again, the chart would be flawed in the sense that it implies you can compare the 18th and 21st centuries.

  11. gman says:

    What were living standards and business cycles like during the “halcyon days” of the gold standard?
    Price stability is a fetish…like masochism.

  12. wunsacon says:

    Most people see what they want to see.

    Here’s what I see:

    - Before 1900, what fuel did we run on and were the supplies plentiful in a vast, untapped wilderness? After wars ended, did we maintain standing armies or did we send everybody home and cut costs?

    - Then we switched to oil.

    - We assembled an empire by conquering or bargaining for remote holdings from Spain, Britain, and France. (FDR bargained for those lend-lease destroyers!)

    - Unlike previous wars, we did NOT stand down our armies after WWII.

    - We fought proxy wars in other countries (sometimes referred to as a long “cold war”). (We *pay* people to fight for us. Men and material are not cheap. Even if we use willing fighters, we must pay to arm them.)

    - We built nuclear arsenals far beyond needs.

    - We are maintaining bases in Germany for 60 years already. Go look up how many bases we’re maintaining in how-many countries. Look it up.

    - Supposedly, before 911, the Pentagon couldn’t account for $2 trillion.

    Do you all appreciate the significance of all that?

  13. wunsacon says:

    “Our borrow-and-spending ways are impoverishing us. Throw the sick and elderly into the street!”

    No, that’s not fair. Surely, when secular government pulls back, religious organizations will regain their former glory and perform many of the public services they once did. Just like in medieval times.

  14. Rouleur says:

    …it is just the gold standard…the price jump after 1933, was the government “confiscating” gold at the price of $20 some odd dollars an oz and, after the fact (read – bank holiday), resetting the price of gold to $35/oz…the next phase was through 1971 when the USD, which had been convertible to gold and/or silver, was being sold on the “black” market at some $42+/- an oz…so, an arbitrage trade was then set up such that one could trade in their USD for Au @$35 and sell @$42…that was known as “the gold window”…which Nixon “closed” in 1971…such a freakin’ barbarous relic it is indeed…

  15. HungryHoneyBadger says:

    These sorts of charts must be log-scaled. This chart looks much different from that perspective.

  16. algernon says:

    Rouleur has it right: Reasonably stable when gold standard reigned [which it didn't in 1781 or 1864!].

    gman: It was a period of fantastic growth in wages in spite of huge influxes of immigrants. You should be hesitant to blame the several recessions of the period on the gold standard, as there was all kinds of govt intervention. Esp. 1835, 1870s, 1893.

  17. wunsacon says:

    >> in spite of huge influxes of immigrants.

    …who killed the natives and farmed at-the-time seemingly endless amount of new land.

    *Who* would expect to see inflation in an agrarian society with endless new well-watered land to till? You seem to read history like nothing fundamental ever changes. Technology and resource availability shape societies just as much as (or more than) choice of government.

  18. MikeW says:

    I knew it…

    This frothy global expansion since 1934 has been illusory, an unsustainable bubble.

    Looks like we’ll be going back to churning butter by hand!

  19. pchoi414 says:

    Don’t forget that 1961-1965 was the original operation twist. As soon as they ended the program, rates starting to skyrocket and we went into a period of hyperinflation. I’m pretty sure you can relate this back to ROC/level of fiscal deficit and that would help explain some of the move higher. This chart is denominated in dollars right?