Political Economy
... and the Future for Precious Metal Markets
The topic of the future prospects for precious metal markets and how major trends in the world
economy affect them is reminiscent of a speech written by Jeffrey Christian in early 1990. The
Berlin Wall had just been breached and the former communist regimes of Eastern Europe were
collapsing. Here, he revisits some old – and new – territory.
THE ECONOMIST MAGAZINE ended ter of the world’s population have been let out of their economic
1989 with a cover titled something cages and are now free to be economic actors in their own lives. The
like Peace Breaks Out. In a speech effects these developments are having on real economic growth
written that winter, I stated that whilst worldwide are made clear in Figure 1.
the world had become safer than it It is not just China or globalization that is at work here. Economic
had been for decades, there were sev- and financial deregulation, business and manufacturing automa-
eral major long-term trends that were tion, improved telecommunications, the Internet, and more efficient
foreboding. management and planning are combining with globalization to
The one I focused on was the internal push the world economy into uncharted territory.
divisions within the Muslim world. From
Morocco to Indonesia, I said, a fifth of
It is not the low-wage worker in Malaysia or China
the world’s population lived in coun-
that is the great risk to American manufacturing
tries many of which were deeply divid-
ed between modernist, semi-secu-
jobs. It is the computer on the desk next to yours
larised, wealthy autocrats and more
fundamentalist, religious, impover- The US has lost more manufacturing jobs over the past 16 years to
ished, repressed peoples. Given the computers than it has to exported jobs. It is not the low-wage work-
presence of petroleum resources in the er in Malaysia or China that is the greatest threat to American man-
ground of many of these countries, ufacturing jobs. It is the computer on the desk next to yours.
their proximity to Europe, and the fact
that the US (and some European gov- Monetary Policies
ernments) strongly assisted in keeping Financial innovation is also helping stimulate worldwide growth.
these repressive regimes in power, I One of the more significant trends that I feel has often been over-
believed that internal stresses posed looked has been a major transformation in monetary policy manage-
serious threats to the world economy ment in most countries. Financial market commentators still com-
and political peace. Nine months later plain about the practices of the Federal Reserve Board and other
Iraq invaded Kuwait. monetary authorities. The truth is that monetary policy management
The other four points I focused on in in the US, Europe, Japan, and many Asian nations has been extreme-
that speech were the global implica- ly successful at protecting world economic trends since the early
tions of the economic rise of China, the
future of what was then a disintegrat-
Figure 1: World Real GDP, Projected through 2007 (%)
ing Soviet Union, the implications of
globalization and deregulation, and the
rise of computerization.
All of these factors remain key issues
17 years on. The implications of many
of them have become more clear. The
rise of China, along with countries from
Brazil to India, is moving the world
toward a much more vibrant, wealthy
economic environment in which people
across the globe can participate in eco-
nomic growth and development on a
more balanced basis.
In my 2006 book, Commodities
Rising, I stated that more than a quar-
Source: IMF, CPM Group
48 SEPTEMBER 2007 COMMODITIES NOW
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