The economic numbers for the first quarter of 2008 showed that while the U.S. is not yet in a recession, we're sure darn close. The quarter's scant 0.6 percent growth rate suggests that ridiculously high commodity prices (oil, corn, pork bellies) should fall back to earth as Americans cut their spending, reducing demand. But as recent earnings reports show prices have skyrocketed. Since last August, the price of a barrel of crude has gone from $70 to over $110, despite six months of stagnant economic growth. The same is true for other commodities like copper, where trading volume has remained stable, suggesting that the price hike is not entirely due to speculative investors.
While economists make fine arguments in support of the belief that the rise in commodity prices is a symptom of bad monetary policy, it's also hard to dismiss the fact that high prices could simply be a matter of supply and demand - or at least expected supply and demand. One Wall Street Journalwriter suggests that ...1