From the course: Economics for Everyone: Understanding a Recession
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Commodities
From the course: Economics for Everyone: Understanding a Recession
Commodities
- Commodities are the most fundamental building blocks of economic growth. Without them, economic growth doesn't happen. Commodities include energy like oil and natural gas as well as fuels like gasoline and diesel. There's metals, copper, aluminum, steel, and agricultural commodities, rubber, cotton, and grains that go into food. All of those building blocks go into the physical goods we buy. Without those commodities, the goods don't happen. And when the economy slows, the demand for those goods falls, and commodity prices usually fall quite sharply. In fact, commodity markets are exceptionally procyclical. This means when the business cycle's good and economic growth is up, commodity prices are up. Why, because people demand physical goods. It also means when the economy slows and goes into recession, commodity prices usually fall very quickly. Commodity prices are driven by demand, and that means by growth. If…
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