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  • Sometimes it requires a very long term perspective to come to a view about what will happen in the near future.

  • So to think about the price of say iron ore today, it might make sense to consider the cost of steel

  • carried by the troops of William and Mary in the Glorious Revolution of 1688.

  • Or for that matter, the price of French guillotine steel a century later, or the expensive casting canons

  • when Bismarck unified the German States in 1871.

  • A little too much perspective perhaps. Focusing on the twentieth century then.

  • And the price of commodities through a period of industrialization, wars, development, and globalization.

  • In that context, the recent experience for commodity prices looks like the third big bubble for raw materials.

  • The first peaked early in the 1920s; the second came after the oil shock of the 1970s.

  • And the most recent as China moved a large proportion of its population into cities,

  • going from a closed economy to the world's second-largest.

  • As growth in China has begun to slow, well, prices for raw materials have collapsed.

  • You can see this also in our second chart, which shows the relationship between the oil price and inflation over time.

  • It's a logarithmic scale, but as you can see, ultimately the oil price tends to come back to inflation.

  • The point of the history lesson is to realize the collapse so far is incomplete.

  • BCA research have compared a basket of the the commodity prices against consumer prices since 1680.

  • And over time, the two did not fundamentally diverge, at least for long.

  • Demand for what is pulled from the ground has risen dramatically at times.

  • But this merely serves to send geologists looking for more.

  • Technology improves as well, as does the productivity of extraction, transportation, and manufacturing.

  • So a decade when price rises much faster than inflation, well, that caused new mines to be dug, wells sunk and shell to be fractured.

  • To bring commodity prices back into line with consumer prices now, well, that's going to require another fall

  • by as much as forty percent, estimated BCA.

  • In terms of the oil price, think 30 dollars a barrel as a reasonable estimate of what the long run suggests.

  • But also remember, prices can overshoot on the way down as well as the way up.

Sometimes it requires a very long term perspective to come to a view about what will happen in the near future.


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B1 中級

商品価格インフレの必然的な死|ショートビュー (Inevitable death of commodity price inflation | Short View)

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    Noppe に公開 2021 年 01 月 14 日