This measure of spot commodity prices is up 25% from the lows of last December. I still see lots of people downplaying the significance of rising commodity prices, arguing that China and India are mindlessly stockpiling the stuff, and speculators are driving prices higher, so higher prices don't really reflect any improvement in the global economy. Well, take a look at the fine print at the bottom of this chart, which details the 22 different commodities that comprise this index. Do you really think the Chinese and the world's speculators are stockpiling butter, cocoa, corn, soybean oil, sugar, and tallow? I don't think so. I think this index is sending two big messages: 1) the global economy is rebounding strongly after last year's collapse, and 2) monetary policy is overly accommodative, as it is helping to fuel the rebound.
Keep your eye on commodity prices. They trade in real-time, and they consolidate all the production and consumption decisions of the billions of people in the world. You couldn't ask for a better coincident indicator of what's going on out there. This is undeniably good news. The doomsayers are watching the wrong stuff. Yes, mortgage defaults are going to be rising, and yes, commercial defaults are going to be rising. But high default rates are already priced into bonds—the market has effectively realized those losses already. That's yesterday's news. Commodities are today's news, and commodity prices are rising across the board. Deflation is history. Depression is not happening. This is not going to be a double-dip recession, it's a global recovery.