Odd Lots: How a Consultant Predicted the Commodities Crash ... Five Years Ago

Commodities Crunch: What's Driving Prices Down?
Source: Bloomberg

Every week, Odd Lots takes you on a not-so-random walk through hot topics in markets, finance, and economics.

On this episode, co-host Tracy Alloway joins forces with Luke Kawa, Bloomberg Markets reporter, for a journey back in time. While the global elite mingle at the World Economic Forum's annual meeting in Davos, Switzerland, we look back at a previous WEF gathering that took place five years ago.

The mood at the Davos meeting of January 2011 was buoyant—markets had successfully recovered from the financial crisis of 2008 and the euro-zone debt crisis had yet to fully unfold. Barrie Wilkinson, a partner at the consulting firm Oliver Wyman Ltd., was not feeling so jubilant, however.

While bankers, regulators, and politicians patted themselves on the back for a job well done, he was warning of a coming financial crisis that would begin with a crash in the price of commodities in 2015. In hindsight, parts of his 27-page report look eerily prescient.

"Based on favorable demographic trends and continued liberalization, the growth story for emerging markets was accepted by almost everyone," Wilkinson wrote in 2011. "However, much of the economic activity in these markets was buoyed by cheap money being pumped into the system by Western central banks. Commodities prices had acted as a sponge to soak up the excess global money supply..."

We speak with Wilkinson about how the report came to be, what happened after it was published, what it got right and what it got wrong, plus what worries him now. 

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SoundCloud: Episode 12: How a Consultant Predicted The Commodities Crash... Five Years Ago by Bloomberg Business



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