The short lived commodity “super cycle”

by Laura Ehrenberg-Chesler on May 1, 2015

in Commodities,Debt,Foreign Markets

Commodities prices are often used as a proxy for the health of the global economy.  This past Tuesday, Ed Yardeni had an interesting take on the commodity “super cycle” and the implications for its shorter life this go around.

Malthus was wrong, according to a 4/25 WSJ article titled “World Awash In Too Much Of Almost Everything.” The story notes, “The global economy is awash as never before in commodities like oil, cotton and iron ore, but also with capital and labor–a glut that presents several challenges as policy makers struggle to stoke demand. … Meanwhile, public indebtedness in the U.S., Japan and Europe limits governments’ capacity to fuel growth through public expenditure. That leaves central banks to supply economies with as much liquidity as possible, even though recent rounds of easing haven’t returned these economies anywhere close to their previous growth paths.”

 I’ve been arguing for some time that ultra-easy monetary policy has boosted global supply more than demand. That’s why the commodity super-cycle wasn’t so super, lasting roughly 10 years from 2001 through 2011.”

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