Feature

The next crash will be commodities

The frothy market for everything from oil to wheat to platinum is eerily reminiscent of the dot-com bubble.

Ruchir SharmaTheAtlantic.com

The commodities boom is headed for a bust, said Ruchir Sharma. The frothy market for everything from oil to wheat to platinum is eerily reminiscent of the dot-com bubble, but it is having a “larger and more negative impact on the global economy” than that era ever did. The chief problem is that commodities aren’t treated as raw materials anymore, but as “speculative instruments.” Copper piles up in warehouses not for lack of demand, but “because speculators are sitting on it, like gold, figuring that they can sell it one day for a huge profit.” Daily trading in oil dwarfs daily consumption, driving up energy prices and acting as a “profound drag on the economy.” At least the tech bubble grabbed our popular imagination, and stoked hopes that technological innovations might improve the world. The only things the commodities boom inspires are “complaints about rising gasoline prices and outbreaks of unrest” over rising food costs. When the dot-com bubble burst, we learned to distrust “irrationally high prices.” Today’s commodity speculators would do well to remember that lesson, sooner rather than later. 

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