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As well as relating developments in commodity prices with measures of ‘real’ economic activity, such as industrial production and merchandise trade flows, our work also looks closely at the interplay the effect with money supply. Milton Friedman’s lapidary remark that ‘inflation is everywhere a monetary phenomenon’ may be bordering on a truism for us disciples of the Austrian School for whom a perceived surfeit of money IS by definition ‘inflation’—an economic malaise which usually (but not inevitably) manifests itself in a rise in the cost of living—but it will certainly serve to introduce our discussion here. Having constructed a dollar-based measure of the combined money supplies of up to 25 developed countries (19 of them, of course, comprising the present Eurozone) plus eight of the larger emerging ones, we can soon show that not only has it registered an r-squared of 0.75 with commodities over the past three decades, but that both the changes each has undergone and those changes’ first differences (their acceleration, if you will) show positive correlations in excess of 50%. It will therefore be of some considerable interest to the reader to learn that this measure—having undergone a major retardation between the summer of 2016 and that of 2017—has since quickened appreciably and has lately attained a 16.4% YOY rate of climb which is the fastest since the first great reflationary rebound from the GFC began to fade, back in the middle months of 2011. Leading the charge, as ever, have been the emerging contingent— their 21.0% rise being the best in over 7 years—but the larger, advanced grouping have not exactly been sluggardly, racking up an impressive 14.6% in their turn. Looked at in terms of the number of extra dollar-equivalent units of money put into circulation this past twelve months, we find they amount to an astonishing $5.5 trillion and, as such, surpass the emergency, post-Lehman injection by more than a third as well as being in equal in magnitude to the entire stock of such money in being in late 1994 when the Fed was about to end that year’s aggressive tightening cycle. Interestingly, this towering extension to the world’s spendable medium was built in roughly equal parts of actual new flow additions to the money supply and of the upward revaluation of its existing stock occasioned by the decline of the dollar on the exchanges. Though this latter element was in fact the largest such contribution in our sample (the euro and the yuan being the main culprits here, with a little assistance from the pound sterling), the printing presses of Messrs, Draghi, Kuroda and Zhou also played a major role by contributing 22%, 15% and 38% of the new flows, respectively. The implications of all this for the future should be readily apparent: should the dollar continue to weaken, should the ECB and the BOJ continue to force money into the system, and should the PBoC succeed in not transmuting its renewed regulatory zeal from the current deceleration into an outright contraction, commodity prices should continue to be well-supported and to threaten resistance, rather than support, in the months ahead.

S. Corrigan