Pitfalls and Pipelines - Philippine Indigenous Peoples Links

Chapter 1.2: Financial Innovations and the Extractive Industries
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I apologize to the reader for trotting out what might seem
to be at times inconclusive figures. But this is the key point:
the long-established pretended direct relationship between
demand for metals and minerals and their supply, essentially
no longer holds. The fixing of a realistic and sustainable
market price for these materials has been usurped by a raft of
speculative financial “tools.”
“Fast Money”
Let’s look at this phenomenon in a little more detail.
Writing in April 2010, Mark Carnegie, the head of Lazard
Australia Private Equity, was in little doubt that:
“The current high levels of the equity markets are a byproduct
of the bond market. People invest in shares as an
alternative to earning a fixed rate of return by putting
money in a bank or buying longer term investments that pay
a fixed rate of interest… The money has to go somewhere, so
lots of it is going into the share market…
“The real nuttiness in the global capital markets is that our
overspending western governments can borrow at such low
rates of interest…[I]t is…certain that the ability for the U.S.
and other profligate nations to borrow at these rates will
end and, when it does, it will be ugly for all capital markets,
including shares. As interest rates increase, the investment
alternatives to shares become more attractive and so people
sell shares to buy bonds and put their money in cash.” 13
Two years on, and Carnegie’s prediction appears not
to have been fulfilled—at least in regard to the direction in
which minerals-related investment has been flowing. Neither
bond nor shares markets have been a preferred destination
for “fast” cash, on any scale, that may now be looking for a
home. Rather, such money has increasingly gone into metals’
Exchange Traded Funds (ETFs) or into derivatives’ betting
(see Box 1 for more details of this).