I love this CRB chart via Jim Bianco of Bianco Research:
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
I’d like to see this chart adjusted for inflation.
BR I don’t get why you reposted your WP article as if you hadn’t already posted it, deleting the original post (and disallowing comments, hence my comment misplaced here). You seemed to take the self-imposed “rules” of your blog pretty seriously, but lately TBP is going police state revisionism.
I know you consider yourself the king of this kingdom, fine, but it don’t look good. Digital citizens, particularly those who show up here, want integrity and know their options.
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BR: Um, because I didn’t — they are two completely different posts.
Sunday: http://www.ritholtz.com/blog/2011/05/the-many-hats-of-great-investors/
Tuesday: http://www.ritholtz.com/blog/2011/05/many-hats-great-investors/
I added the 2nd one because traffic on weekends is 40% of weekdays, and I wanted that column to be more widely seen.
thinking a 200+ year chart should be in log scale
Interesting but not obvious to me how they arrived at their numbers for the index. Any notes on the methodology?
The 1864 peak is counterintuitive. Without giving away any–or, at least, too much–proprietary research, is there an explanation offered for it?
(The ones following all lead rather directly into, at least, recessions. But it take nine years after the 1864 peak for a problem to be officially noted. 1815 might be post-War boom, and 1781 is basically the last chance to “buy the rumour” of a US victory before the debt burden becomes clear.)
Needs to be log scale and needs a second version deflated by inflation. This material in isolation is misleading at best.
Bah, I meant adjusted for inflation. I bet this chart is largely downward sloping, adjusted for inflation.
“…I bet this chart is largely downward sloping, adjusted for inflation…”
that’d be more of the “Inflation ex-Inflation”-type of *thinking, no?
Adjusted for Inflation is the rallying cry of Gold Bugs and Idiots
This graph shows the ratio of two variables: the value of commodities divided by the value of a dollar.
Looks to me like commodities are limited in supply and dollars are abundant.
Interesting that we broke out of a 200 year range right when we abandoned the gold standard and the dollar became a pure fiat currency.
The fact that the CRB stayed in a range for 200 years until the early 70′s is probably attributable to the fact that money was backed by gold and/or silver for most of that time.
I would venture to guess, that most of the upward spikes coincide with episodes of rapid money supply growth.
Most of the CRB spikes appear to be related to war or the aftermath of wars, either due to scarcity, money printing, or both.
What jumps out at me are the steps up from roughly 50 to 100 (double), 100 to 200 (double), and 200 to the 400 zone (which would be another double if we end up settling there).
For those of you who want to “check my integrity,” you can search for prior posts 3 ways:
1) You can use the Google site search box (top right hand corner);
2) You can select a category of posts by either clicking on any of the categories at the end of each post (ie, Category: Commodities, Technical Analysis for this post) or alternatively, lower portion of side column;
3) You can pull up posts by month lower portion of side column;
As I state in the disclosures, I never take down a post (unless its based on judicial order) and once a post sets, it will not be changed.
@ klhoughton
The Civil War was in full swing in 1864 and there were sharply reduced supplies of agricultural commodities due to men being away from their farms in the armed forces, as well as some destruction of farmland and crops. War-induced interference with supply channels excaerbated these shortages. I recall reading that the price of pork in particular skyrocketed around this time.
BR – any chance we could get some clarification? Why do you like it? What does it tell us other than commodities have generally been going up since creation of the Fed? I mean, from a what do I do today investment perspective it looks like a secular bull since 1930s but they’ve also bounced so far off the ’08 bottom it feels like it is harder to know what to do here today, esp given end of QE in 30 days. If you’re not long now, at what level would you buy? or would you buy at all?
Let me add a question to postman’s thought. Is the pricing in 1864 in greenbacks or gold dollars? Recall that during the civil war the government issued fiat currency, the greenback, which during 1864 sunk to $.34 of the gold dollar. Recall the gold room on wall street where people played the difference between the two forms of currency. So if the 1864 figures are in greenbacks (united states notes) dollars it takes the value down to near 50.
socaljoe and nofoulsontheplayground are on the right track I think: Abandonment of the gold standard in the 1930′s assured dollars could become far more plentiful relatively speaking but the real kicker was probably Nixon’s abandonment of Bretton Woods and the fixed price for gold in 1971. That aside, wars and there aftermath explain most of the pattern as far as I can tell, but as the more populous developing nations grow I would also expect substantial, non-war related shortages to develop.
Agree with those calling for a log scale, semi-log in this instance, or perhaps both scales with log on the left Y axis and nominal scale on the right: logs present a more meaningful picture for any variable whose growth is likely to be proportional to its amount although that is more clear when rate is fairly constant (may not be the case here).
NB: If non-war related shortages are developing one would expect to see an uptick in (log) rate over the past decade or two. Not likely to pick that up with a nominal scale; it’s already pretty noisy.
“Liquidity Trader Says: May 25th, 2011 at 2:30 pm
Adjusted for Inflation is the rallying cry of Gold Bugs and Idiots”
I think you are reading too much into it. Adjusting for inflation merely shows the “real” price changes, versus “nominal” price changes, which this chart shows. You don’t have to be a gold bug to see the importance of this distinction, and it doesn’t have to logically lead to a wholesale denouncement of fiat currency.
Chart of Major U.S. Wars, mostly.
how interesting (typical?)
BR puts up a chart and 80% of the comments throw some fundamental spin at it
quite amazing how the majority always prefer to predict their indicators rather than just reading the actual indicator
All of you asking for the chart to be adjusted for inflation – WTF? This *is* a chart of inflation – what purpose would it serve to adjust it for inflation?
Also it’d be dumb to show it in log scale – purchasing power is not in log scale is it? If the price of something goes up by 1000%, do you only pay 2x for it? No, you pay 10x for it.
Regarding the methodology – Wikipedia is your friend:
http://en.wikipedia.org/wiki/Reuters-CRB_Index
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