TWO of the most commonly cited culprits for the apparent general downturn of the world economy are falling oil and commodity prices, particularly for coal and industrial metals. Yet despite the importance given to these two key indicators, clear explanations of exactly why they are bad for the economy are almost impossible to find.

The reason for that, of course, is that low oil and commodity prices are an effect rather than a cause. A low price for oil, or coal, or copper ore, or aluminum, or a processed rare-earth metal is not by itself a bad thing; on the contrary, it should encourage more economic activity. But the prices are low because of a dearth of demand; that condition creates circumstances in which low prices have an aggravating effect on an already flagging economy, an effect that can easily be given more importance than it should.

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