Tyler Cowen claims that market prices say the “demand for raw materials will continue to outstrip the supply”. But I don’t see the market prices saying that. Tyler seems to be extrapolating from trends of the past few years.
He seems to be ignoring what futures contracts for delivery several years out are saying. Here’s what I see for commodities with futures contracts several years out:
|Commodity||Nearest future contract||Farthest future contract|
|Silver||$7.307||$7.848 (Jul 2009)|
|Crude Oil||$51.15||$42.41 (Dec 2011)|
|Natural Gas||$6.304||$5.721 (Dec 2010)|
|Copper||$1.477||$1.255 (Dec 2006)|
Gold and silver prices are expected (as usual) to maintain their purchasing power, while prices of other commodities that have had big run-ups recently are expected to fall.
I’ve been making some investments that are based on the belief that markets are underestimating Chinese/Indian demand over the next 5 years or so. But markets are clearly saying that the Hubbert Peak arguments are either wrong, or unimportant due to the likelihood of a switch to alternative fuels. And with metals, it sure looks like we are seeing merely a combination of asian demand and a weak dollar.