Commodity Super-Cycle

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pages: 606 words: 87,358

The Great Convergence: Information Technology and the New Globalization by Richard Baldwin

3D printing, additive manufacturing, Admiral Zheng, agricultural Revolution, air freight, Amazon Mechanical Turk, Berlin Wall, bilateral investment treaty, Branko Milanovic, buy low sell high, call centre, Columbian Exchange, commoditize, Commodity Super-Cycle, David Ricardo: comparative advantage, deindustrialization, domestication of the camel, Edward Glaeser, endogenous growth, Erik Brynjolfsson, financial intermediation, George Gilder, global supply chain, global value chain, Henri Poincaré, imperial preference, industrial cluster, industrial robot, intangible asset, invention of agriculture, invention of the telegraph, investor state dispute settlement, Isaac Newton, Islamic Golden Age, James Dyson, Kickstarter, knowledge economy, knowledge worker, Lao Tzu, low skilled workers, market fragmentation, mass immigration, Metcalfe’s law, New Economic Geography, out of africa, paper trading, Paul Samuelson, Pax Mongolica, profit motive, rent-seeking, reshoring, Richard Florida, rising living standards, Robert Metcalfe, Robert Solow, Second Machine Age, Simon Kuznets, Skype, Snapchat, Stephen Hawking, tacit knowledge, telepresence, telerobotics, The Wealth of Nations by Adam Smith, trade liberalization, trade route, Washington Consensus

Because this high-tech, low-wage combination turned out to be a world beater, the easier movement of ideas sparked massive North-to-South flows of know-how. It is exactly these new knowledge flows that make the New Globalization so different from the Old Globalization. Curiously Concentrated Effects and the Commodity Super-Cycle Importantly, G7 firms own this know-how, so the new North-to-South knowledge movements should not be thought of as some enormous “Kumbaya moment.” Rich nations are not sending their know-how to poor nations in a burst of caring and sharing. G7 firms work hard to ensure that their offshored knowledge stays within the confines of their production networks.

While the second unbundling’s impact on industrialization was hyper-concentrated, the Great Convergence was a much broader phenomenon due to knock-on effects. About half of all humans live in the developing nations that are rapidly industrializing, so their rapid income growth created a booming demand for raw materials. Booming demand, in turn, created the “commodity super-cycle,” which subsequently sparked growth takeoffs in many commodity-exporting nations that were untouched by the emergence of global value chains. Globalization’s Next Big Thing: Globalization’s Third Unbundling The three-cascading-constraints narrative—which is summarized graphically in Figure 3—plainly admits the possibility of a third unbundling, if face-to-face costs plunge in the way coordination costs have since the 1990s.

In this way, the flows of knowledge that used to happen only inside G7 factories became a key player in globalization (light bulbs in bottom panel). These new information flows allowed a handful of developing nations to industrialize at a dizzying pace—resulting in a massive shift of industry from the North to the South. This Southern industrialization—together with the commodity super-cycle it launched—propelled emerging market income growth rates to unprecedented levels. The result was the “shocking share shift” shown in Figure 1. In a nutshell, this is how the ICT revolution transformed globalization and its impact on the world economy; up to 1990, globalization was mostly about goods crossing borders; now it is also about know-how crossing borders .


pages: 537 words: 144,318

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money by Steven Drobny

Albert Einstein, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, bond market vigilante , book value, Bretton Woods, BRICs, British Empire, business cycle, business process, buy and hold, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, Commodity Super-Cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, global macro, Greenspan put, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, inverted yield curve, invisible hand, junk bonds, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, market microstructure, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, proprietary trading, purchasing power parity, quantitative easing, random walk, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, SoftBank, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, stocks for the long term, survivorship bias, tail risk, The Great Moderation, Thomas Bayes, time value of money, too big to fail, Tragedy of the Commons, transaction costs, two and twenty, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

Even though we are in a general strong upward trend in commodity prices, interim volatility can be huge, as we saw in the second half of 2008. Commodity Super Cycle The Commodity Super Cycle is an economic theory based on demographic trends and the resultant effect on demand for basic commodities. According to the theory, it is generally believed that by 2050, the global population is expected to number 9.1 billion people, assuming declining fertility rates. Finite raw materials, coupled with an increasing population base, will translate into higher prices. Over the past decade, Jim Rogers (Inside the House of Money, Chapter 11) has become one of the best-known advocates of the “Commodity Super Cycle” theory. According to Rogers, the twentieth century has seen three secular bull markets in commodities (1906-1923, 1933-1955, 1968-1982).

I knew from that initial conversation that he understood how to construct great risk-versus-reward trades and would be a moneymaker, which has proven correct. Nearly two years later, I sat down with the Commodity Trader again at a mahogany table in an art-adorned conference room in his high tech offices, where currently he presides over one of the largest commodity hedge funds in the world. He is a firm believer in the commodity super cycle, and spends a great deal of time thinking about the second-order effects on other markets and products. He says that pension funds and other real money investors have an economic reason to invest in commodities as an inflation hedge, but the devil is in the details. It’s all about how you construct the trade.

When structuring a trade in an industrial commodity, you can make reasonable assumptions on supply, but the economic cycles have been so violent in recent years that they have been an even bigger driver of commodity prices than the underlying supply cycles for example. The volatility during 2008 and 2009 reminds me of the 1997-1998 period (see Figure 8.1). Back then, the Asia crisis and the collapse of emerging markets caused a massive sell-off in commodities. It looked like the commodity super cycle that people even back then had been talking about for so long was off the table. It looked as if it was going to take years for some of the emerging market countries to pay back the IMF for their loans, creating a strong headwind to a commodity price recovery and an environment of extreme bearishness.


pages: 417 words: 109,367

The End of Doom: Environmental Renewal in the Twenty-First Century by Ronald Bailey

3D printing, additive manufacturing, agricultural Revolution, Albert Einstein, Asilomar, autonomous vehicles, business cycle, Cass Sunstein, Climatic Research Unit, Commodity Super-Cycle, conceptual framework, corporate governance, creative destruction, credit crunch, David Attenborough, decarbonisation, dematerialisation, demographic transition, disinformation, disruptive innovation, diversified portfolio, double helix, energy security, failed state, financial independence, Ford Model T, Garrett Hardin, Gary Taubes, Great Leap Forward, hydraulic fracturing, income inequality, Induced demand, Intergovernmental Panel on Climate Change (IPCC), invisible hand, knowledge economy, meta-analysis, Naomi Klein, negative emissions, oil shale / tar sands, oil shock, pattern recognition, peak oil, Peter Calthorpe, phenotype, planetary scale, precautionary principle, price stability, profit motive, purchasing power parity, race to the bottom, RAND corporation, Recombinant DNA, rent-seeking, rewilding, Stewart Brand, systematic bias, Tesla Model S, trade liberalization, Tragedy of the Commons, two and twenty, University of East Anglia, uranium enrichment, women in the workforce, yield curve

The International Monetary Fund’s food price index has dropped from its 2011 high of 192 points to 147 points in February 2015, a fall of about 25 percent. Was this rapid run-up in prices a sign that the limits to growth were now upon us? Certainly many ideological environmentalists have interpreted the price spikes that way. Peak Commodity Super-Cycle? “The world is at, nearing, or past the points of peak production of a number of critical nonrenewable resources—including oil, natural gas, and coal, as well as many economically important minerals ranging from antimony to zinc,” warned prominent environmentalist Richard Heinberg in his 2010 article “Beyond the Limits to Growth.”

For example, in late 2013, Reuters polled twenty leading oil industry experts and obtained estimates for 2020 prices ranging from $70 to $160 per barrel. The International Energy Agency projects that the price of oil will be around $128 per barrel (2012 dollars) in 2035. In their analysis of commodity super-cycles, Erten and Ocampo report: “In contrast to these trends in non-oil commodity prices, real oil prices have experienced a long-term upward trend, which was only interrupted temporarily during some four decades of the twentieth century.” This suggests that the price of oil will not likely fall back to its 1998 average of $17 per barrel (2014 dollars).

Maugeri’s suggestion that oil prices could dip below $50 per barrel in the near term was realized in January 2015 when the price for benchmark West Texas Intermediate crude hovered around $45 per barrel, but he generally assumes that the price will remain above $70 in the run-up to 2020. Despite reassuring petroleum reserve estimates and the downward pressure on prices that increased production and the waning of the current commodity super-cycle generates, a peak oil crisis might still happen. How? Through political mismanagement. Political Peak Oil “The real problems concerning future oil production are above the surface, not beneath it, and relate to political decisions and geopolitical instability,” notes Maugeri. It is a disquieting fact that government-owned oil companies control nearly 90 percent of the world’s oil reserves and produce about 75 percent of current supplies.


pages: 829 words: 187,394

The Price of Time: The Real Story of Interest by Edward Chancellor

3D printing, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, asset allocation, asset-backed security, assortative mating, autonomous vehicles, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Bernie Sanders, Big Tech, bitcoin, blockchain, bond market vigilante , bonus culture, book value, Bretton Woods, BRICs, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cashless society, cloud computing, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Commodity Super-Cycle, computer age, coronavirus, corporate governance, COVID-19, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cryptocurrency, currency peg, currency risk, David Graeber, debt deflation, deglobalization, delayed gratification, Deng Xiaoping, Detroit bankruptcy, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, double entry bookkeeping, Elon Musk, Ethereum, ethereum blockchain, eurozone crisis, everywhere but in the productivity statistics, Extinction Rebellion, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goodhart's law, Great Leap Forward, green new deal, Greenspan put, high net worth, high-speed rail, housing crisis, Hyman Minsky, implied volatility, income inequality, income per capita, inflation targeting, initial coin offering, intangible asset, Internet of things, inventory management, invisible hand, Japanese asset price bubble, Jean Tirole, Jeff Bezos, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, large denomination, liquidity trap, lockdown, Long Term Capital Management, low interest rates, Lyft, manufacturing employment, margin call, market bubble, market clearing, market fundamentalism, Martin Wolf, mega-rich, megaproject, meme stock, Michael Milken, Modern Monetary Theory, Mohammed Bouazizi, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, Northern Rock, offshore financial centre, operational security, Panopticon Jeremy Bentham, Paul Samuelson, payday loans, peer-to-peer lending, pensions crisis, Peter Thiel, Philip Mirowski, plutocrats, Ponzi scheme, price mechanism, price stability, quantitative easing, railway mania, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk free rate, risk tolerance, risk/return, road to serfdom, Robert Gordon, Robinhood: mobile stock trading app, Satoshi Nakamoto, Satyajit Das, Savings and loan crisis, savings glut, Second Machine Age, secular stagnation, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, stock buybacks, tech billionaire, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tim Haywood, time value of money, too big to fail, total factor productivity, trickle-down economics, tulip mania, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, Walter Mischel, WeWork, When a measure becomes a target, yield curve

In October of that year, several rare earths soared into the stratosphere after China imposed an export ban. To a large extent the commodity boom was driven by strong demand for raw materials from China, but bubbles also formed in precious metals (platinum, gold and silver) which emerging countries might have coveted but didn’t need for practical use. Wall Street hailed a ‘commodity super-cycle’ and urged investors to get exposure to this hot alternative asset. It would not have surprised Adam Smith to discover that real estate markets around the world reacted positively to the stimulus of ultra-low interest rates. From London to Sydney, residential property prices in the leading cities danced to the same monetary jig.3 As an executive at Savills, a property consultant, commented: ‘What happened was that, for the first time, the cost of money in most of the cities was similar – you might say quantitative easing [has] levelled the global playing field.’4 Real estate brokers referred to the favoured destinations of the world’s super-rich as ‘golden concrete’.5 In the United Kingdom, the country’s ‘housing crisis’ was generally ascribed to a lack of housebuilding.

Stanford economist Ronald McKinnon argued that the Arab Spring originated with ultra-low interest rates in the United States, which, as we have seen, drove capital flows into the emerging world and caused ‘overheating’ of the non-climate variety. China’s voracious demand for raw materials, in particular, stoked the ‘commodity super-cycle’.19 Easy money also stoked speculation in commodities, touted on Wall Street as a hot ‘alternative asset class’. McKinnon posed a tantalizing counterfactual: ‘If the Arab Spring had been recognized as mainly a food riot, the response of Western governments would have been more measured in taking sides, while focusing more actively on monetary measures to dampen cycles in primary commodity prices.’20 THE TAPER TANTRUM After the financial crisis, borrowers in developing countries took full advantage of the low rates available in the West.

To find a specific word or phrase from the index, please use the search feature of your ebook reader. 3G Capital, 161, 169 AEG (German company), 159 African American households, 211 AIG (insurance giant), 175, 221 Alberti, Leon Battista, 21 Alexander the Great, 12 Alibaba, 283 Altman, Edward, 223 Amazon (company), 203 AmeriCredit Corp, 167* Amsterdam, 35–6, 39, 47 Anbang Insurance, 285–6 Anderson, Benjamin, 87, 88, 90, 91, 92 Anglo-Dutch Wars, 33 annuities, 26, 69, 195, 197, 229 Antiphanes (Athenian playwright), 18 Antiphon (Greek orator), 20 Apple, 54, 149, 166, 176, 241 Aquinas, Thomas, Summa Theologica, 19, 25 Arab Spring (2011), xxiii, 255–6 Argentina, 79–80, 79*, 242–3, 263 aristocracy/landed classes: in Ancien Régime France, 49, 51; in ancient Mesopotamia, 200; and price of land, 34–5, 39, 42, 44 Aristotle, 9, 18, 19, 20, 28, 40 Arnd, Karl, 4 art market, 180, 208–9, 271 Artemis Capital, 231 Asian economic development model, 267, 278; Asian crisis, 114, 252, 278 asset price bubbles: before 2008 crisis, xxiii, 32, 44, 111–19, 204; and Arab Spring, 255–6; bond market in 2010s, 226; and Borio’s financial cycle, 132–3, 134, 135; bubble economy term, 184–7; Cantillon’s view, 58, 60–61; Chinese real-estate bubble, xxiii, 271, 272–4, 282, 288, 289; in commodities (from 2010), 173–4, 255–6, 257; construction booms, 62–3, 69, 74, 90, 112, 144, 148, 258–60, 273–9; crypto bubbles, 177–9; Dotcom bubble, 111–12, 136–7, 176, 204; Everything Bubble in post-crisis decade, 44, 138–9, 173–80, 180, 181–3, 185, 193–5, 206–10, 215, 306–9; expansive monetary policy as common feature, xxiii, 116*, 123, 135, 172–87, 180, 220; idea of creating a bubble to deal with, 113*; Japanese economy in 1980s, xxiii, 105–8, 145, 182, 184, 271, 273, 279, 285–6; misallocation of capital during, 43, 114, 148–50, 266–81, 289; relation to real economy, 182–3, 185, 237; stock market bubble in 1920s USA, xxiii, 87–91, 90*, 92–4, 96–8, 98*, 112, 203; at times of low inflation, xxiii, 134, 135; unstable bubbles in China, 270, 271–4, 282, 288; vast investment boom in China, xxiii, 128, 267–81, 280*, 282–9; and wealth illusion, 193–5 see also Mississippi bubble asset-backed securities, 175, 225, 226–7 Assyrian empire, 12 AT&T, 167, 168 Augsburg, 202 Augustus, Roman Emperor, 12, 15 Australia, 175, 192, 239 Austria, 93, 93*, 97, 261; Wörgl’s currency experiment, 243, 294 Austrian economists, 32, 94–6, 100, 108 see also Hayek, Friedrich; Schumpeter, Joseph Ayr Bank, collapse of (1772), 63 Azerbaijan, 262 Babylonia, 3–4, 5–8, 9–12, 13, 13, 14–15 Bacon, Francis (artist), 208 Bacon, Sir Francis, ‘On Usury’ (1612), 34, 35, 40, 43, 44 Bagehot, Walter, 62, 63–4, 66–8, 70–71, 72, 74, 149, 155, 251; Bagehot rule, xxiii, 74–6, 80; and dangers of foreign lending, 66, 77, 78; on foreign lending craze, 78; warnings over easy money, 64, 66, 67, 68, 69, 72, 78, 80–81, 220, 233; Lombard Street (1873), 69, 74, 75, 76, 81 Bain Capital, 163 Balding, Christopher, 277* Bank for International Settlements (BIS), 11, 101, 107, 113–14, 131–4, 135–9, 144, 153, 168, 261 Bank of Amsterdam (Wisselbank), 47, 68 Bank of England: during 1920s, 82–3, 85–6, 92, 93; acquires foreign corporate securities (2016), 241†; Bagehot on role of, xxiii, 64, 66, 74, 75–6; Bank Charter Act (1844), 75–6, 76*; ‘corset’ in Bretton Woods era, 291; ‘credit easing’ policy, 242; dominion over credit markets, 292–3, 293*; and financialization, 168; founding of (1694), 47; and Gold Standard, 85, 251; inflation targeting, 119, 121, 241; as lender of last resort, 66, 74–6, 80; nationalization (1946), 172; NICE (non-inflationary consistent expansion), 112; in nineteenth-century, 42, 65, 66, 70, 71–2, 75–6, 79, 80; policies in post-crisis decade, 151, 153, 174, 233, 235, 241, 293; and regulation, 232, 233; and secular stagnation narratives, 126, 205–6 Bank of France, 82, 83, 92, 93 Bank of Japan (BOJ), 105–8, 119, 122, 146, 192, 224, 241, 242, 244–5, 271, 294 Bank of Spain, 117 banking: 1825 crisis, 64–7, 75; back-alley banking in China, 281–3; bankers as unpopular, 18; Casa di San Giorgio, Genoa, 47–8; development in Middle Ages, 22–4, 35; expansion in Britain during Napoleonic Wars, 69–70; and fountain-pen money, xxiv, 42, 269, 312; Law establishes General Bank (1716), 49–50; merchant banks in ancient world, 7, 8; National Banking System in USA, 157; ‘net interest margin’ eroded by ultra-low rates, 136; pre-twentieth-century panics/crises, 63, 64–8, 69, 70, 72–6, 79–81; repo market, 236*, 239, 245; UK and US economies shift towards, 167–8; vast expansion in China, 265–6; and zombification, 147, 148 see also financial sector Baoding Tianwei Group, 280 Baoshang Bank, 285 Baradaran, Mehrsa, 215* Barbon, Nicholas, 15 Barcelona, 23 Baring, Alexander, 65 Baring, Sir Francis, 74–5, 76 Baring Brothers, 74, 76, 80 Basel Committee, 232 basketball, shot clock, 141 Bastiat, Frédéric, xvii, xviii–xx, xxi, xxii, xxv, 9, 188–9, 215, 306 Batista, Eike, 257, 258 Bavarian Soviet Republic, 243 Bayer (German firm), 225 Bear Stearns, 175 behavioural research, 29 Belgium, 225 Benda, Julien, La Trahison des Clercs (1927), 297 Bentham, Jeremy, 30, 189 Berkshire Hathaway, 161 Berlusconi, Silvio, 293 Bernanke, Ben: actions during 2008 crisis, 76, 253–4; on causes of 2008 crisis, 114, 115–16, 118, 128–9; and easy money before 2008 crisis, 111–12, 113, 115–17, 115†, 118–19; evades consequences for 2008 crisis, 119; and inflation targeting, 119, 119*, 241; joins Federal Reserve (2002), 111–12; and legacy of John Law, 61; on monetary policy, 98, 98*, 115, 115*, 131, 155, 207, 230, 238; policy of dealing with aftermath of bubbles, 111–12, 114; and savings glut hypothesis, 128–9, 191; and taper tantrum (June 2013), 239, 256–7, 259, 263; and ultra-easy money after 2008 crisis, 124, 131, 133, 137–8, 153, 155, 181–3, 207, 215, 230, 238–40, 243–4, 262; view of Great Depression, 98, 98*, 99, 100, 101 Bernard, Samuel, 55* Bernardino of Siena, 25 Bernstein, Richard, 306 Bernstein, William, 128 Beyond Meat, 177 Bezos, Jeff, 203 bills of exchange, 22, 23, 24, 47, 50, 65‡, 71, 130 Bitcoin, 177–9, 307–8 BlackRock, 209, 227, 246 Blackstone Sir William, Commentaries on the Laws of England (1765), 17 BNP Paribas, 253† Bo Xilai, 288 Böhm-Bawerk, Eugen von, xxiii–xxiv, xxv, xxvi*, 13, 16, 19*, 29, 30, 31, 95, 246 Borio, Claudio, 132–4, 135–9, 153, 232–3, 240, 262–3, 269, 311 Borman, Frank, 143 bottomry loans, 6, 26 Bouazizi, Mohamed, 255 Bourbon, Duke of, 55 Brandeis, Justice Louis, 156, 158, 159, 202 Branson, Richard, 213 Braudel, Fernand, 21 Brazil, xxiii, 225, 254–5, 257–8, 291 Bretton Woods system, 133, 251, 290–91, 302 Bridgewater Associates, 229 Britain: 1825 banking crisis, 64–7, 75; building boom in mid-eighteenth-century, 62–3; calamities of 1660s, 33; decision to leave EU, 187, 241, 262; default on sovereign debt (1672), 33, 38; early twentieth century monopolies in, 159; economy in Bretton Woods era, 291, 302*; financial repression today, 292–3; foreign lending manias (1860s-80s), 77–8, 79–80; housing affordability crisis in, 212–13; loss of manufacturing jobs to China, 261*; low economic vitality in post-crisis decade, 124, 150–51, 153, 192; post-1571 debates on excessively high rates, 34–44; Productive Finance Working Group, 293, 293*; railway mania of 1840s, 70–72, 73; return to the Gold Standard (1920s), 43, 82, 85, 86; reversal of global capital flows (late-1920s), 93; Revolutionary/Napoleonic Wars, 41–2, 69–70; shift from manufacturing towards services, 167–8; South Sea Bubble (1720), 69; trade cycle from early eighteenth century, 62–4; usury in, 24, 26, 27, 34, 40, 42, 65‡, 65; zombification in, 146 see also Bank of England British Association of Recovery Professionals, 146 British Home Stores (BHS), 196–7 Brown, Brendan, 218 Brown, Gordon, 112 Brunnermeier, Markus, 236 Bryan, William Jennings, 99 bubble economy term, 184–7 Buchan, James, 54, 56*, 59 Buenos Aires Water Supply and Drainage Company, 80 Buffett, Warren, 126, 161, 225, 307, 308, 308* Bullard, James, 239 Burry, Michael, 198 buyout firms, 160–63, 183†, 204, 207, 222, 223, 237 Byzantium, 25 Calvin, John, 26 Campbell, Donald, 120–21 Canada, 119, 174–5, 192, 196*, 241 Canterbury, Justin Welby, Archbishop of, 17, 201 Cantillon, Richard, 58, 60–61, 60* capital flows, global: in 1920s, 82, 91, 261; Bretton Woods capital controls, 291; capital controls return after 2008, 262, 291; ‘commodity super-cycle (from 2010), 173–4, 255–6, 257; cross-border lending in Eurozone, 144–5; and Dollar Standard, 251–2, 253, 261, 262–3; foreign lending manias (1860s-80s), 77–8, 79–80, 79†; ‘global banking glut’ notion, 132, 252–3; global credit bubble in early 2000s, 252–3, 261; international carry trade, 137, 237–8, 252, 253–4, 256–7, 258; ‘persistent expansion bias’ of monetary system, 262; post-crisis flows into emerging markets, xxiii, 253–9, 262–3; protectionism of 1930s, 261–2; recirculation of in run-up to 2008 crisis, 115‡; recording/measuring of, 137; reversals of, 63, 93, 93*, 261; and role of interest, 139, 251–7, 259–61, 262–3; ‘second phase of global liquidity’ after 2008 crisis, 253–9, 262–3; taper tantrum (June 2013), xxiii, 137, 239, 256–7, 259, 263; Turkish debt, 258–60; and US interest rates, 137, 251–5, 256–7, 259–61, 262–3, 285 capitalism: Bastiat on broad consequences of actions, xix–xx; capital defined, 28, 28*; distortions/disruptions by unicorns, 148–50; distrust of in 1930s, 299; Hayek on, 96, 295–6, 298; Hazlitt on price system, xx; interest rates as at heart of, xxii, xxv, 16, 28, 141, 297; low marginal costs in New Economy, 127–8; Marxist-Leninist critique of, 159–60, 217*, 298; primacy of finance in modern era, 138–9; process of ‘creative destruction’, xx, 140–43, 143*, 153, 296–7; Proudhon on, xvii; role of risk in, 220, 298; Schumpeter on, 140, 153, 296–7; Adam Smith on mutual self-interest, 27–8; state capitalism, 280, 284, 292–5, 297, 298; takes off in medieval Italy, 21–3, 23 Cappadocia, 12 Carillion (construction company), 197 Carnegie, Andrew, 157–8 Carney, Mark, 235 Carroll, Lewis, 309, 311 carry trading, 220–22, 227, 229, 233, 234, 236; international, 137, 237–8, 252, 253–5, 256–7, 258; new regime emerges after 2008 crisis, 221–4, 253–5, 256–7, 258 cars, 173, 179, 210, 220; manufacture of, 142, 166–7, 176–7, 261; and revival of subprime market, 215, 224 Carstens, Agustín, 214* Carter, Jimmy, 108–9 Case, Anne, 213 Cassel, Gustav, xxvi, 36*, 88, 190, 192, 195, 246 Catholic church, 18–19, 23–4, 25–6 central banks: attitudes to risk, 230–31; Bagehot rule, xxiii, 74–6, 80; direct involvement in stock market, 172–3, 241–2, 293–4; dominion over credit markets, xxii, 292–3, 293*; double standards in approach to bail outs, 215; and duration risk, 225; fuelling of asset price bubbles by, 43, 60–61, 88, 110, 113, 115–16, 118–19, 132–6, 174–6, 181–2, 185, 194–5; goal of stable price level, xxiii, 42, 86–8, 94, 96–8, 105–8, 109–13, 133, 203; influence on long-term rates, 133, 134–5; issuing of ‘fiat money’, xxiv, 13, 312; Long Island meeting (1927), 82–3, 88, 92; and March 2020 crash, 305–6; money supply targets in 1980s, 121; move to ‘active’ monetary policy in 1920s, 84, 85–8, 85†, 92–4, 96–8; and responsibility for inequality, 214–17; ‘Taylor Rule’, 116–17 see also quantitative easing and also entries for individual institutions central planning: in Bretton Woods era, 291, 292–5; Hayek’s The Road to Serfdom (1944), 295–6, 298; and misallocation of capital, 264, 266, 269; and problem of regulation, 232–3; reappearance of, 297, 298, 302; during Second World War, 295, 302, 311; and ‘tyranny of metrics’, 120* da Certaldo, Paolo, 21 Chamberlain, Austen, 86 Chamberlen, Hugh, 59* Chan, Melissa, 274 Chang Ying, Remarks on a Regular Livelihood, 265 Chapman, D.


pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business cycle, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, creative destruction, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, driverless car, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, financial engineering, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, global macro, Goodhart's law, guns versus butter model, hiring and firing, hype cycle, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Japanese asset price bubble, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, junk bonds, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, Larry Ellison, lateral thinking, liberal capitalism, low interest rates, Malacca Straits, Mark Zuckerberg, market bubble, Mary Meeker, mass immigration, megacity, megaproject, Mexican peso crisis / tequila crisis, middle-income trap, military-industrial complex, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, open immigration, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, tacit knowledge, tech billionaire, The Future of Employment, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, work culture , working-age population

Instead, it collapsed at the end of the 1980s. By then forecasters had handed the next century to Japan, but it became the next economic star to falter. None of that prevented a new round of excitement in the early 2000s, focused on the rise of the BRICs, or BRICS (some included South Africa in the group), and the commodity super cycle. As the hype was peaking around 2010, the historical pattern for commodity prices—which tend to boom for a decade, then fall for two decades—was about to reassert itself. Today talk of these nations fulfilling their destinies as regional economic powerhouses seems like a dim memory. Recognizing that this world is impermanent leads to the second principle, which is to never forecast economic trends too far into the future.

Sharma, Ruchir. “The Oil Shock with No Pain.” Newsweek, October 31, 2005. ——. “Cracking Inflation Should Be India’s Priority.” Financial Times, December 8, 2013. Stephens, Bret. “Book Review: ‘The Myth of America’s Decline,’ by Josef Joffe.” Wall Street Journal, November 6, 2013. Ward, Justin. “Commodity Super Cycle Analysis.” Wells Fargo Research, January 15, 2015. Warsh, Kevin, and Stanley Druckenmiller. “The Asset-Rich, Income-Poor Economy.” Wall Street Journal, June 19, 2014. Wilson, Dominican. “Emerging Markets: EM Macro Daily—Who in EM Can Live the Australian Dream?” Goldman Sachs Global Investment Research, February 26, 2014.


pages: 249 words: 66,492

The Rare Metals War by Guillaume Pitron

Albert Einstein, Berlin Wall, carbon footprint, circular economy, clean tech, cloud computing, collapse of Lehman Brothers, Commodity Super-Cycle, connected car, David Attenborough, decarbonisation, deindustrialization, dematerialisation, Deng Xiaoping, Donald Trump, driverless car, Elon Musk, energy transition, full employment, green new deal, green transition, industrial robot, Internet of things, invisible hand, Jeff Bezos, Kickstarter, knowledge economy, Lyft, mittelstand, offshore financial centre, oil shale / tar sands, planetary scale, planned obsolescence, Silicon Valley, smart cities, smart grid, smart meter, South China Sea, spinning jenny, Tesla Model S, Yom Kippur War

The colossal investments needed to build the downstream industry were delayed, and the country’s trade balance began to teeter as budget shortfalls accumulated. In 2017, the country had no choice but to loosen its strategy by allowing several minerals to be exported again.49 The drop in commodity prices was largely responsible for this setback, as this nationalistic approach was for the most part implemented during a global ‘commodities super cycle’ — fifteen years of plenty that began in 2000, during which market prices skyrocketed. It was a boon for buyer countries, but also put seller countries in a position of force that aroused their nationalist instincts. But the super cycle ended in 2014. The consumer-producer trade power returned to an even keel, and producer countries began to think twice before investing higher up the value chain.


pages: 232 words: 70,835

A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan by Ben Carlson

Albert Einstein, asset allocation, backtesting, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, book value, business cycle, buy and hold, buy low sell high, Commodity Super-Cycle, corporate governance, delayed gratification, discounted cash flows, diversification, diversified portfolio, do what you love, endowment effect, family office, financial independence, fixed income, Gordon Gekko, high net worth, index fund, John Bogle, junk bonds, loss aversion, market bubble, medical residency, Occam's razor, paper trading, passive investing, Ponzi scheme, price anchoring, Reminiscences of a Stock Operator, Richard Thaler, risk tolerance, Robert Shiller, robo advisor, South Sea Bubble, sovereign wealth fund, stocks for the long run, technology bubble, Ted Nelson, transaction costs, Vanguard fund, Vilfredo Pareto

Investors need to understand themselves to be able choose wisely among the assets they include in a portfolio. Myth 11: Commodities Are a Good Long-Term Investment Want to know the best way to find your way into a financial advisor's asset allocation model? Exhibit supremely strong performance over the most recent period. Case in point is the mid-2000s commodities super-cycle that caused many investors to consider an allocation to commodities. Most diversified baskets of commodities more than doubled in value in the 2001 to 2007 period. Precious metals equities—the stocks of the companies that extract these commodities for use—were up an astonishing 615 percent.


pages: 310 words: 85,995

The Future of Capitalism: Facing the New Anxieties by Paul Collier

accounting loophole / creative accounting, Airbnb, An Inconvenient Truth, assortative mating, bank run, Bear Stearns, Berlin Wall, Bernie Sanders, bitcoin, Bob Geldof, bonus culture, business cycle, call centre, central bank independence, centre right, Commodity Super-Cycle, computerized trading, corporate governance, creative destruction, cuban missile crisis, David Brooks, delayed gratification, deskilling, Donald Trump, eurozone crisis, fake news, financial deregulation, full employment, George Akerlof, Goldman Sachs: Vampire Squid, greed is good, income inequality, industrial cluster, information asymmetry, intangible asset, Jean Tirole, job satisfaction, John Perry Barlow, Joseph Schumpeter, knowledge economy, late capitalism, loss aversion, Mark Zuckerberg, minimum wage unemployment, moral hazard, negative equity, New Urbanism, Northern Rock, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, race to the bottom, rent control, rent-seeking, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, sovereign wealth fund, The Wealth of Nations by Adam Smith, theory of mind, too big to fail, trade liberalization, urban planning, web of trust, zero-sum game

The global boom in commodity prices of 2000–2013 appeared at the time to be powering Africa and the Middle East forward, but this now looks doubtful. Remarkable new global data has collated comprehensive measures of national wealth per capita, including not only the conventional components such as the capital stock, but education and natural wealth as well.1 The data provides two snapshots – 1995 and 2014 – fortuitously spanning the commodity super-cycle. From it, we can see whether the unprecedented temporary increase in the natural resource earnings of many poor countries has led to gains that can be sustained. What it reveals is that the poorest countries fell further behind everyone else. Not just the absolute increase, but the percentage increase in per capita wealth was much less in the low-income countries than in all other income groups, and in much of Africa wealth actually fell.


pages: 519 words: 136,708

Vertical: The City From Satellites to Bunkers by Stephen Graham

1960s counterculture, Bandra-Worli Sea Link, Berlin Wall, Boris Johnson, Buckminster Fuller, Buy land – they’re not making it any more, Chelsea Manning, Commodity Super-Cycle, creative destruction, Crossrail, deindustrialization, digital capitalism, digital map, Dr. Strangelove, drone strike, Edward Glaeser, Edward Snowden, Elisha Otis, energy security, Frank Gehry, gentrification, ghettoisation, Google Earth, Gunnar Myrdal, high net worth, housing crisis, Howard Zinn, illegal immigration, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, late capitalism, Leo Hollis, low earth orbit, mass immigration, means of production, megacity, megaproject, megastructure, military-industrial complex, moral panic, mutually assured destruction, new economy, New Urbanism, no-fly zone, nuclear winter, oil shale / tar sands, planetary scale, plutocrats, post-industrial society, Project Plowshare, rent control, Richard Florida, Right to Buy, Ronald Reagan, security theater, Skype, South China Sea, space junk, Strategic Defense Initiative, the built environment, The Death and Life of Great American Cities, trickle-down economics, urban decay, urban planning, urban renewal, urban sprawl, vertical integration, Virgin Galactic, white flight, WikiLeaks, William Langewiesche

In the process, the City unleashes utterly new geo-dynamics that will play out for thousands – and in some cases millions – of years to come’.11 Indeed, such urban geological processes work through generations, drawing precious metals and resources from mines and pits at the ends and depths of the earth to be refined, processed, manufactured, and dug into the city in the form of vast concentrations of subterranean pipes, wires and conduits. Here a stark irony presents itself. World urbanisation and economic growth regularly create spikes in commodity prices as even the frenzied extension of mining (largely in the Global South) fails to meet demand. The so-called ‘commodities super cycle’ between 2000 and 2014 is a powerful example. Thus, as metals become more expensive and valuable, the very manufactured geology under the world’s cities becomes a lucrative ‘mine’ itself. Authorities in Scandinavian cities are already exploring techniques that will allow them to dig into their manufactured ground to pull out the valuable metals within unused, obsolescent or previously forgotten ‘hibernating’ infrastructure – old tram lines, disused district heating pipes, abandoned power and telephone wires, forgotten nineteenth-century gas networks and so on – as resources to sustain contemporary economic development.


pages: 442 words: 130,526

The Billionaire Raj: A Journey Through India's New Gilded Age by James Crabtree

accounting loophole / creative accounting, Asian financial crisis, Big bang: deregulation of the City of London, Branko Milanovic, business climate, call centre, Capital in the Twenty-First Century by Thomas Piketty, centre right, colonial rule, Commodity Super-Cycle, Cornelius Vanderbilt, corporate raider, creative destruction, crony capitalism, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, facts on the ground, failed state, fake news, Francis Fukuyama: the end of history, global supply chain, Gunnar Myrdal, income inequality, informal economy, Joseph Schumpeter, liberal capitalism, Mahatma Gandhi, McMansion, megacity, Meghnad Desai, middle-income trap, New Urbanism, offshore financial centre, open economy, Parag Khanna, Pearl River Delta, plutocrats, Ponzi scheme, post-truth, quantitative easing, rent-seeking, Rubik’s Cube, Shenzhen special economic zone , Silicon Valley, Simon Kuznets, smart cities, special economic zone, spectrum auction, tech billionaire, The Great Moderation, Thomas L Friedman, transaction costs, trickle-down economics, vertical integration, Washington Consensus, WikiLeaks, yellow journalism, young professional

“Indians are no longer going to remain subdued and live in a simple fashion…Young Indians want to be like me.”36 But he rose to prominence in a particular moment in Indian history, namely the economic boom of the mid-2000s. In the consumer economy, millions of Indians bought cars, built houses, and took flights for the first time. What was called the global commodity “super-cycle”—driven in particular by rising demand in China for minerals like coal, bauxite, and iron ore—kicked off a dash for natural resources across India too. Stock markets roared ahead, creating a bulging new billionaire class. It is hard to pick an exact date, but at some point between the time of Manmohan Singh’s election victory in 2004 and Mallya’s fiftieth birthday party the following year, something in India changed, and a new gilded age began.