Why are the prices of so many commodities rising in an economy that seems to remain quite weak?

% change butter35 coffee21.8 cocoa20.2 copper89.1 corn-8.3 cotton38.6 gold32.1 hogs2.7 oats13.4 oil63.2 lead81.9 palladium75.9 platinum61.7 silver59.1 steel-0.9 sugar73.6 tin22.5 wheat-26.6 zinc55.4 average37.4 euro12

The table at the right summarizes the percent change between January 6 and November 11 in the cash prices of 19 commodities reported in the Wall Street Journal (downloaded via Webstract). The average commodity in this list has appreciated 37% since the start of the year.

A recent paper by Ke Tang and Wei Xiong documents an increasing tendency for commodity prices to move together over the last few years. A decade ago, what happened to oil prices was largely unrelated to movements in most other commodity prices. The graphs below show how the correlations between oil prices and

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A rise in existing home sales last month shows things are getting better in the U.S. housing market, but the still-dire unemployment situation and the looming possibility of a jobless recovery may halt the rally by the end of the year. That makes the extension of an $8,000 tax credit for first-time homebuyers imperative.

Existing home sales rose 7.2% to a 5.24 million annual rate in July, the most since August 2007 and the fourth straight month the figure increased, the National Association of Realtors (NAR) said Friday. Year-over-year sales grew 5%, the increase since September 2007, just before the markets came crashing down the following month.

“The housing market has decisively turned for the better,” said NAR chief economist Lawrence Yun. “A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.”

Rising sales numbers

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Simple question: how do you invest during an inflationary boom? Today, some concrete ideas. And the simplest idea of them all-when you consider soaring government deficits-is to sell government bonds and buy beaten down, world-class equity.

Mind you, this is if you want to be in the equity market at all. There is a very good case to be made for NOT being in the equity market this year, or only being in those asset classes and single stocks you think will appreciate (or grow earnings) faster than the rate of inflation.

But let’s be more direct and say that this is still a bear market. The bear market began in 2000 with the popping of the tech bubble. The Fed fought back in 2003, setting a low-interest rate policy the rest of the dollar-pegged world followed. This kicked of leveraged booms in residential housing, credit derivatives, and stocks, bonds and commodities.

All

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While the U.S. Federal Reserve’s plan to buy more than $1 trillion in debt has helped unfreeze the credit markets, it has also effectively capped U.S. Treasury yields and undermined the dollar.

And that’s caused commodities to soar as currency speculators and safe-haven investors head for higher ground.

At the culmination of the policymaking Federal Open Market Committee’s (FOMC) two-day meeting Wednesday, Fed Chairman Ben S. Bernanke revealed that the central bank would purchase up to $300 billion in longer-term Treasury securities, as well as an additional $750 billion of mortgage-backed securities. The central bank also said it would buy debt issued by government-sponsored agencies such as Fannie Mae (FNM) Freddie Mac (FRE).

“To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750

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