Why Commodity Prices will Collapse By 2015

Michael Pettis at China Financial Markets believes commodity prices will collapse by as much as 50% over the next few years. His rationale is solid.

Here are a few snips from a recent Michael Pettis email in which he outlines the case.

By 2015 Hard Commodity Prices Will Collapse

There are four reasons why I expect prices to drop a lot more.

First, during the last decade commodity producers were caught by surprise by the surge in demand. Their belated response was to ramp up production dramatically, but since there is a long lead-time between intention and supply, for the next several years we will continue to experience rapid growth in supply.

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