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If memory serves, commodities prices were too expensive at mid-year. Corn was too high for ethanol companies to make money. One of the largest, Verasun (VSE), just went bankrupt. Oil prices were so high that people could not drive and would not buy new or used cars.

The agricultural products used to make most food jumped up so much that the normal consumer could not get a loaf of bread for under $50.

Apparently, all of that has changed.

According to Bloomberg, "Industrial raw materials measured by the Journal of Commerce fell at an annual rate of as much as 56 percent last week, the most since 1949 and worse than the declines before every recession since then." Prices might get more stable if businesses and consumers were in an expansive mood, but no one is buying anything. A consumer recession has lead to deflation in commodities prices and with joblessness rising, there is no reason to believe that will change.

The data is another piece of information encouraging economists to believe that deflation is the worst factor facing the economy. Adding the present recession to the overall picture makes it look like Japan in the 1980s and 1990s. It is called an "L-shaped" downturn because it drops quickly and runs along its bottom for a long time. No one has said, but that must be in contrast to better "U-shaped" or "V-shaped" tough economic times.

Referring to the alphabet is no cure. Commodities prices were supposed to stay high because nations like China were going to suck up supply for their incredible factory production. Now that the West is importing fewer of their goods, that theory is starting to get leaky.

The trouble with stagflation is that no one has come up with a sure fire formula to fight it. Bringing interest rates down to zero does not help much if demand for the things that money can buy is undermined by job losses and cautious businesses. Creating a government system to buy commodities from cooper to corn worldwide would cost trillions of dollars. That available capital is already going to underwrite aid to banks to cut off a liquidity crisis.

Commodities are driven up by two things. One is robust consumer demand and the other is war.

Making tanks and war ships available at zero rate financing probably will not do the trick

Douglas A. McIntyre.