Regarding Our Current Commodity Super Cycle Richard (Rick) Mills
Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information
Commodity super-cycles are defined as decades long price movements in a wide range of commodities. Super-cycles differ from shorter term fluctuations in three ways:
- Super-cycles are demand driven because they follow world GDP
- Super-cycles span a much longer period of time with upswings of 10-35 years, taking 20-70 years to generate complete cycles
- Super-cycles are observed over a broad range of commodities, mostly inputs for industrial production and urban development of an emerging economy
According to DESA Working Paper No. 110 ‘Super-cycles of commodity prices since the mid-nineteenth century’ published February 2012 by Bilge Erten and José Antonio Ocampo there have been 3.5 non-fuel commodity super-cycles from 1894 to 2009:
(1) from 1894 to 1932, peaking in 1917. The first long cycle begins in late 1890s, peaks around World War I, and ends around 1930s, and shows strong upward and downward phases.
(2) from 1932 to 1971, peaking in 1951. The second takes off in 1930s, peaks during the post-war reconstruction of Europe, and fades away in mid 1960s. It shows a strong upward phase but a weak downward one.
(3) from 1971 to 1999. The early 1970s marks the beginning of the third cycle, which peaks around early 1970s and turns downward during mid 1970s and ends in late 1990s. This cycle shows a weak upward phase and a strong downward one.
(4) 2001 still ongoing. The post-2000 episode is the beginning of the latest cycle, which has shown a strong upward phase which does not seem to have been exhausted so far.
The most recent boom (from 2001) in global economic growth or GDP, is unprecedented.
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