Commodity Super-Cycle and Decline

Founded in 1928, Canadian Business is the longest-publishing business magazine in Canada.

More than you probably realize, Canada’s future prosperity rests on the outcome of a political thriller unfolding an ocean away.

This much we know. On March 15, one of the contenders to become China’s president for the next decade, Bo Xilai, was sacked as the Communist Party boss for Chongqing, an inland megalopolis with a population roughly equal to Canada’s. Not only that, he was kicked out of the 25-member Politburo and thus out of contention to join the nine-member standing committee—the executive body that really runs China—at the end of this year.

Not long after, Bo’s wife, Gu Kailai, was charged with last November’s suspected murder of a British businessman, Neil Heywood. Bo and Gu had been China’s most potent power couple, offspring of revolutionary heroes and renowned for fighting organized crime. Their revival of Mao-era patriotic songs was a callback to the country’s past—yet they had a son at Harvard known for driving a Ferrari.

The rest of the tale is hearsay: that a heavily indebted Heywood, a former family friend and fixer who had helped get Bo junior into Harrow (Heywood’s prestigious alma mater in England) had demanded a bigger cut of a business deal; that he threatened to expose underhanded dealings by Gu if he didn’t get it; that Bo’s police chief, Wang Lijun, had confronted him over the alleged murder (the death was originally put down to alcohol poisoning), after which Wang sought asylum at an American consulate;

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The above video is a Commodities Boom discussion panel put on by the Milken Institute 2012 Global Conference. (April 30, 2012)

Maclean’s is the largest circulation weekly news magazine in Canada, reporting on Canadian issues such as politics, pop culture, and current events. The interview below, with economist Dambisa Moyo, comes from the June 4, 2012 issue of the magazine.

Zambian-born, Oxford- and Harvard-trained economist Dambisa Moyo, 43, first rose to prominence with her bestselling 2009 polemic Dead Aid. In it she argued that development aid from rich countries to poor African nations has left the continent mired in dependency, corruption, market distortion and deeper poverty. In her new book, Winner Take All: China’s Race for Resources and What It Means for the World, Moyo rings a new alarm. Only China, she believes, has realized the pressure that rising world prosperity is placing on increasingly scarce commodities, and has begun to act accordingly.
 
Q: You are a free-market economist, but here you are expressing a limits-to-growth view.
 
A: Three billion new people will join the middle class by 2030. This is a positive trend toward a wealthier and more inclusive global order, and it will not be possible without healthy levels of economic growth. My concern is the limits to the kind of economic growth now under way. There is increasing demand for land, water, energy and minerals that far exceeds the diminishing supply.
 
Q: The situation you describe seems Malthusian: peak oil—and peak land, peak water, peak minerals—writ large. Wouldn’t free-market determinists respond that either the market or technological change will see us through?

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The Toronto Star, has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

As artificial constructs go, the phantom colossus of emerging economic superpowers known as BRICS has had an overhyped 11-year run and needs to be retired.

The acronym was coined by a global economist at Goldman Sachs Group Inc., the New York investment bank, in 2001. At that time, Brazil, Russia, India and China – the first countries to which Wall Street applied this new marketing term (South Africa, the “S” in BRICS, was added last year) – were, or at least appeared to be, characterized by rapid GDP growth that outpaced the developed world, and the adoption of Western-friendly free-trade practices, deregulation policies, and streamlined bureaucracies.

If not one of the bigger hoaxes of the new century, the BRICS certainly aren’t the threat to the old world order they’ve long been touted as.

The torrid GDP growth rate that prevailed in the BRICS countries through the 2000s has markedly slowed in each of them. And the Western-friendly reforms have stalled or were stillborn.

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www.mineweb.com

Speaking at the New York Hard Assets Investment Conference this week, respected analyst Adrian Day gave the reasons for his belief that the recent resource boom is still far from over.

NEW YORK (MINEWEB) – Not surprisingly – given metal price performance at the time – the audience at the New York Hard Assets Investment Conference was a little depressed. With gold heading down to the low $1500s – the lowest for several months and, of course, junior mining stocks, which is the sector most of the audience would be there to hear about, having been particularly hard hit.
 
What the audience really wanted advice on was addressed in one of the earlier keynote presentations by Adrian Day.  Is the resource boom over? was the title of his talk and he prefaced it with an immediate No!    In particular he made some very salient points about global copper production and the copper market itself.  He pointed out that the shortest full copper price cycle in recent history was 17 years, while the current copper cycle only started in 2001 – so if this is the end of the current resource boom this would be the shortest such cycle in over 200 years by a very long margin – which he did not see as likely.
 
Also he made the very apposite point that most of the world’s copper production comes from old mines where production is declining – either for technical or falling grade reasons – while it takes at least a 10 year lead time – mostly a lot longer to bring a significant new copper mine on stream so it is relatively straightforward assessing he future production scenario given that almost certainly there will not be a new major copper mine opened in the next 25 years which is not already known about.

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The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Published 40 years ago, the Club of Rome’s cataclysmic environmental bestseller The Limits to Growth heralded the imminent end of human progress. Written by five Massachusetts Institute of Technology scientists, the book asserted – with relentlessly Malthusian logic – that the world was heading toward global economic collapse. For many people, the assertion made sense. For many people, it still does. An ever-rising world population must inexorably deplete the world’s finite resources. Doesn’t it?

In a retrospective analysis, U.S. economist Charles Kenny, senior fellow with the Washington-based Center for Global Development, says the world isn’t coasting on empty. Quite the contrary, he says. “The biggest concern isn’t that the planet is running out of resources – it’s having too many for the planet’s own good.”

According to The Limits of Growth, the world was already – in 1972 – approaching Peak Gold, “the date when global [gold] production was to reach its supposed maximum, afterward and evermore to decline as dwindling reserves were tapped out.”

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