Crude oil is not the only commodity that is crashing. Iron ore is on a similar trajectory and for a common reason. Namely, the two-decade-long economic boom fueled by the money printing rampage of the world’s central banks is beginning to cool rapidly. What the old-time Austrians called ‘malinvestment’ and what Warren Buffet once referred to as the ‘naked swimmers’ exposed by a receding tide is now becoming all too apparent.
This cooling phase is graphically evident in the cliff-diving movement of most industrial commodities. But it is important to recognize that these are not indicative of some timeless and repetitive cycle – – or an example merely of the old adage that high prices are their own best cure.
Instead, today’s plunging commodity prices represent something new under the sun. That is, they are the product of a fracturing monetary super-cycle that was a unique and never before experienced aberration caused by the 1990s rise, and then the subsequent lunatic expansion after the 2008 crisis, of a cancerous regime of Keynesian central banking.
Stated differently, the worldwide economic and industrial boom since the early 1990s was not indicative of sublime human progress or the break-out of a newly energetic market capitalism on a global basis. Instead, the approximate $50 trillion gain in the reported global GDP over the past two decades was an unhealthy and unsustainable economic deformation financed by a vast outpouring of fiat credit and false prices in the capital markets.
This post was published at David Stockmans Contra Corner by David Stockman ‘ December 29, 2014.
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