What is copper? – The counter

Salvador Allende said that copper was Chile's salary. It's true, but it's very fickle. You never know what we will receive the next month. Like all rare things, its price changes every moment because it depends exclusively on the vagaries of demand. The normal commodity, on the other hand, is equal to the cost of production and steadily decreases with that. In addition, the demand for copper does not have one but two components: production for final consumption as all goods and, precisely because its price changes at every moment, speculation. Worst of all, it is that it is the command. This is how it is explained that the price of copper and all raw materials, more or less in unison, goes to the clouds when their productive consumption wobbles, while the developed economies go through periodic secular crises. Conversely, he comes to the ground when he and they recover and grow quickly. The problem is that secular crises last less than two decades, while the secular recovery and boom last more than two years, and the one that is in progress is only in its first phase. Poor Prediction

The price of copper has followed a roller coaster ride full of paradoxes over the last eight decades. It does not show a secular declining trend, as technology has extraordinarily multiplied labor productivity, as is the case for all non-scarce products. This means that the remarkable productivity gains have more or less offset the growing scarcity of good law deposits. In this way, the government could authorize the sages that it periodically collects to determine the price of copper in the long run: this presents no mystery, it is about two dollars a pound. Specifically, and using the COCHILCO metric, its average from 1935 to date reaches exactly 2.15 dollars in 2012 per pound, equivalent to 2.30 dollars today. Measured in gold, which for these purposes is very useful, given its material currency function whose quotation has fluctuated freely since 1974, the average price of copper is 176 grams of gold per ton . The most incomprehensible, however, with his incessant foolish fluctuations is his long-term trajectory. This follows what has been called a "supercycle", which moves in synchrony with the secular cycle of developed economies, only exactly the opposite. In other words, he doubles his average when they are in crisis; and conversely, it is reduced to half when they recover and boil.

Indeed, over the past eighty years, the price of copper has two huge "mountains" in which it approaches the four dollars per pound, preceded and separated by deep valleys in which it falls to one dollar per pound. The first years of prosperity extend since 1963, when the price rises steadily above average, and 1980, with the exception of a few years between 1975 and 1978 when it fell somewhat below . That is to say, we were in jauja most of the 17 years during which the country "chilenizó" then nationalizes copper.

The second fat period begins in 2005, when again the price of copper regularly surpbaded the average of two dollars per pound. After again touching the four dollars in 2007 and slightly surpbading them in 2011, it has rocked down to today, losing half of its maximum value, but without falling below average, with the exception of a few months between October 2008 and March. 2009, at the height of the global financial crisis. Thus measured, the second period of high prices already extends over more than thirteen years.

Prior to 1963, as well as between 1980 and 2004, however, the price of copper was consistently below its long-term average, with the exception of a period in the mid-1950s and months scattered between 1987 and 1996 where the price was briefly above average. In other words, the price of copper has been less than two dollars a pound for about five of the last eight decades. About half of this time was less than a dollar and a half, and reached its historic lows of the last eight decades in 1935, the year that starts this series with a price of $ 1.02 per pound, and the period between 1998 and 2001, when the current secular crisis began, when it dropped to $ 1.08.

Paradoxically, the copper price cycle follows exactly the inverse of the secular cycle of developed economies . The first "mountain" of prices emerges above average on the eve of the secular collapse of the stock markets of developed countries, which collapse in 1965 and will not return to their level this year as they are. a quarter of a century later.

On the contrary, the price of copper regularly plummets below the average level in 1980, precisely when the world stock markets reached a secular low and began their very long recovery and boom that would last until the end of the year. century. The second "mountain" of high copper prices begins to increase precisely in 1998, when the "Asian crisis" gives the first big bell of what would be the most serious secular crisis in the developed economies since the 1930s. above the average level in 2004 and the rest until today.

The new downward trend in the price of copper begins after hitting the sky at $ 4.6 per pound in February 2011 and sinking down averaging $ 2.24 in 2016 and after a recovery During the fall of copper, the stock markets of the developed countries continued to recover and after 18 years equaled its level of the beginning of the century last January.

If the stock exchanges of the developed countries reflect the real movement of the underlying economies, this is confirmed by the evolution of wage employment in proportion to the population aged 16, perhaps be the most accurate indicator of real economic activity countries. The first "mountain" of high copper prices appeared above average in the mid-1960s, precisely when the proportion of employees employed by the US population over 16 stagnated after its long and rapid growth in the world. ;after war.

On the contrary, the price of copper plummets regularly below average in 1980, when the proportion of employees relative to the population in the United States begins another long ascending phase that brings it to its historic peak in 1999 , on the eve of the bursting of the "dot com" bubble.

Once again, the extraordinary boom in copper prices of the 2000s occurs as American salaried employment, expressed as a proportion of the population over the age of 16, shrinks sharply at the bottom of the market. Year 2011. Precisely the year that the new collapse of copper begins, while the proportion of employed employees compared to the population of the United States. starts to bounce regularly. It is interesting to note that in 2018, this proportion is still below its historical maximum reached at the end of the last century, just before the secular crisis.

The rest of the raw materials follow a very similar path to copper, with a certain lag or anticipation in the main inflection points described above, as can be seen in the income series of the 14 main materials published by the World Bank.

Will this story be repeated? Will copper fall steadily and for decades below its long-term average as it did in the 1980s and 1990s? Primo Levi wrote that if this happens once it can happen again, it does not only apply to major political phenomena. Sensible economists also warn against the risk of baduming that "this time will be different".

To answer these questions, it is not enough to look at the charts on either side, as brokers do. The important thing is to understand the main determinants of this "supercycle", to understand the deep currents that move it. The answers of the great financial speculators who bet each day – every millisecond with the current technologies – bet billions of dollars on the rise or the fall of the copper, and which are the main traders and storage of copper and other raw materials, are not not convincing According to them and their small court of experts with a large presence in the media, the so-called "fundamentals" of the copper market would be in their supply and their productive demand. They may want to disguise their own role in the constant rises and falls in the prices of all commodities, which affect the lives and wealth of billions of human beings, especially in emerging countries.

Others show the depth of their thought by attributing this cycle to purely monetary phenomena. If the dollar rises or falls, then the price of copper moves in the opposite direction. Obvious Such geniuses have never wondered, apparently, why the price [1965-1900] of copper and the rest of commodities move exactly in unison, rise and fall together, with emerging markets and currencies [19659006]. Also with the corporate and general indebtedness in these economies, as they have discovered with regret the "Piranhas" of the 1980s.

To try to understand this phenomenon, as well as others in this sphere of Essential activity of human beings that is to produce and exchange what they need to live, it is useful to always look less, as uncomfortable, clbadical economic theory. It was born two and a half centuries ago, precisely with the discoveries of the progressive farmer James Anderson, inventor of the Scottish plow, rent theory and modern social clbades. Anderson knew well that two of them, himself as a pioneer capitalist and his workers, are delighted to take advantage of the third, represented by the elegant owner of the Duke of the best lands and closest to Glasgow Whenever they managed to reduce their costs some innovation, the rent went up. In this way, the price of wheat did not depend at all on its production costs, but on those of the most arid and remote lands that had to be cultivated to satisfy the growing demand of the "Second City of the World". "Empire" flourishing. The same or a few years later, Adam Smith would publish his "Inquiry into the Nature and Origin of Modern Wealth of Nations", concluding that this was born exclusively from human labor applied to the production of goods and services that are sold in

The conclusions of the clbadical economics in this regard, summarized at the beginning, allow to identify the decisive role of speculation in demand, which in turn determines the ever fluctuating price of rare goods, regardless of their costs. of production, unlike the rest of the goods where the price is equal to its cost of production decreasing stably minus the transfers of part of the average capitalist profit to the annuitants. A simismo, l a clbadical economics helps to understand why speculative capital abounds in the recurring periods of economic crisis of the major economies, where additional productive investment no longer generates profits, but the l 39; ; reverse.

Thus, as swallows in search of a better climate, large mbades of capital that are surplus to the North in secular crisis, flow abundantly, carefree, daring, generous, but very greedy for profits for the South emerge. There, they find everything they find to speculate: coins, bags and raw materials, among other things. More dangerous, they carry the public and private debt to unsustainable levels. All of this is reversed when central economies recover, once again offering huge opportunities for productive investment closer to home. The swallows' flight to the North in the 1980s and 1990s destroyed everything that had blown up in the last decade in the South and welcomed debtors who no longer renegotiated their debts, further increased by the devaluation of the currency.

The "lost decade" of Latin America was that of 1980, not the precedent as it did in the North. The recent devaluations of emerging currencies – which, for the most part, have been clear one day -, stock market declines and commodity prices are adding to those mentioned in 2011. Large groups and indebted countries begin to suffer from the cold again.

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