Economist: Trade Wars, Resource Hoarding Likely Fallout of Downturn

The stress of financial crisis makes nations do a lot of things that distort the normal patterns of the global economy. Trade wars take place as nations try to protect their domestic markets at the same time that they attempt to penetrate other markets with aggressive prices or the establishment of subsidies for their own producers. Within the last few years, there has been another dimension to this protectionism: nations highly developed and less so alike hoarding natural resources.

The hoarding takes the form of buying up commodity production by state agency, locking in commodity production with long-term agreements and stockpiling what that nation can control. A recent series of reports suggests that these actions will become more common and more dangerous in the future.

The three most important threats to the global economy will come from distorted pricing, unreliable supply and uneven distribution of key resources. The hoarding of these commodities will take product off the market, thus driving prices higher regardless of actually supply availability. This will apply to food commodities, metals and oil.

In such events, the supply situation would be upset, as many of the producer nations will not know what the real demand and making price projections will be far less reliable. Only some nations will have the ability to stockpile, and that leaves the poorer states without access to the commodities needed. The expectation is that famine could become widespread, and commodity shortage in the industrial sector will leave many nations without the ability to grow their economies fast enough to contend with their immediate societal needs. Expect the most affected parts of the world to be in Africa and South Asia, where volatility could, in turn, become far more serious.

-Armada Corporate Intelligence

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