It was the best of times and the worst of times as commodities fell of the charts (almost literally).? Why is this troubling because I certainly don’t dread filling my tank us nearly as much lately?? Because such a rapid decrease in commodities prices could spell rapid deflation.? I know that is hard to swallow with so much concern recently on the inflation front.? But when assets decrease in value, the money supply shrinks, which is deflationary.? If that happened, the Fed would have to backpedal hard.? Does anyone remember how Japan fared when their central banks?overreacted?? Rapid drops in equities and real estate (gulp)?led to shrinking money supply and a high demand for liquidity.? So crank up the presses and lower those rates, right??

Lower inflation and gas prices can be a good thing if they don’t happen too fast.? If things drop too fast in any one sector like this, it can act like a cement block tied to the economy’s neck that was tossed over the side of a bridge.? If growth pressures are real then it could further lower demand for assets.? If a recession is really on the horizon then I certainly don’t want to see deflationary pressures coming along for the ride, even if it is chipping in for cheaper gas.

Jason, perhaps you could work up one of your great charts for the Nikkei circa the 1990s and compare it to our current situation.? Hopefully our Fed will handle things a little more calmly but you never know.? I’m reminded of those pictures of planes trying to land in Hong Kong. Maybe it will all cancel out and we will have our soft landing. But maybe we’ll end up in the harbor.