The Best Cure for High Commodity Prices

In the commodity pits, traders often say: "The best cure for high commodity prices is high commodity prices." That's because when a commodity price soars, it depresses demand for the commodity and stimulates the supply of it.

History shows that an even better cure for high commodity prices is a recession. During the late phase of economic expansions, the economy tends to boom. That drives up commodity prices, which boosts inflation. That forces central banks to tighten monetary conditions, which results in a recession. Commodity prices tumble during recessions and so does inflation.