Monday's Wall Street Journal tried to argue that the headline-making Treasury-bond sell-off is "technical" and does not infer stronger economic growth. Consider this analysis par for the course. These days, it seems that nothing can sway the major media into believing that a more robust recovery is on the way.

Since June 3, the bellwether Treasury bond that matures in 10 years has lost nearly 10 percent in price as its yield unexpectedly jumped to 4.3 percent from 3.1 percent. Bond rates typically rise during recoveries and fall in recessions. During the economic and stock market slump that began in early 2000, Treasury rates plummeted to nearly 3 percent from almost 7 percent.

Now, there's a hitch in the recent Treasury development. Beginning last May, Federal Reserve Chairman Alan Greenspan argued that to ward off deflation, the Fed might make special purchases of Treasury bonds and thereby inject more cash into the financial system. This caused bond prices to rise temporarily and yields fell. But in congressional testimony earlier this month, he completely backed off this position, sucker-punching the Treasury market and contributing to a rout in bond prices. Call this Alan Greenspan's head-fake bond bungle.

But that aside, the Treasury collapse -- and the current rise in real interest rates -- does infer stronger economic growth.

Economists used to use static snapshots to identify real bond yields, subtracting the inflation rate from the Treasury market rate. But now the market for TIPS -- Treasury Inflation-Protection Securities -- makes it possible to capture real interest-rate expectations.

So, because of the TIPS market -- where yields have risen to around 2.5 percent from under 1.5 percent -- we know that nearly all of the recent nominal rise in the 10-year Treasury has been absorbed by a near-comparable real rate rise. Putting it another way, the rise in real interest rates is for real. And rising real interest rates are a clear indicator of stronger investment and economic growth.

Even while Greenspan was shooting off at the lip about special Treasury-bond purchases (still a reasonable way to add cash and decontrol the federal funds target rate), a big tax cut on investment was passed into law. In a significant way, the Bush tax cut boosted real interest rates.

The trouble is, most reporters dismiss a tax cut as just another thing that raises budget deficits. They don't recognize that broad-based tax cuts lead to higher after-tax investment returns and a reduced cost of business capital.

There no longer seems to be any doubt that a new cycle of stronger investment and economic growth lies ahead. Evidence of this can be seen vividly in commodities. The price of gold, which was just over $300 a year ago, has recently run up nearly $25 to $367. At this stage of the nascent business-recovery cycle, a higher gold price serves as both an indicator of liquidity and a harbinger of faster-paced economic activity. Continued...