Monday, January 21, 2013

"Too Much Capital"

Make no mistake about it: over the past several thousand years, the cost of capital, and with it, investment returns, have been falling. Prime credits in Mesopotamia had to borrow at 20% in silver or 33% in grain, and mind you, these were, by definition, real rates.


Allan Folz said...

these were, by definition, real rates.

:-) Good one.

CP said...

Let’s fast forward forty-six years to the NYMEX crude pit in lower Manhattan today. It’s a few minutes before 2 P.M. and what you see boggles the senses: a pullulating mass of huge guys elbowing each other and howling at the tops of their lungs in fits of greed. What you don’t see is big offers coming from independent traders or even from brokers for the major oil companies. Now the largest offers are coming, ultimately, from folks with names like PIMCO and Goldman Sachs. And their clients are hardly scared stiff of deflation. Quite the opposite in fact—these big commodities funds and hedge funds are looking for insurance against inflation. How else does one explain $75 oil and a supply chain brimming with the stuff?