Linear thinking dominates economics and finance and was one of root causes of the recent financial crisis. It is clear to us, the economy and financial markets are nonlinear systems. In hindsight, the collapse of the financial system showed risk had grown exponentially and and the potential for systemic collapse was totally underestimated.
We’ve written about how we’re sitting right at the elbow of exponential curve for technology and what’s coming will blow our minds. We came across this article from the Telegraph this morning about how Japanese scientists have developed a synthetic version of the rare earth metal palladium.
As “we are running out of everything” and as prices rise, the relative cost of R&D and technology declines. Just as robotics replace manufacturing labor when wage rates reach a certain “tipping point”, so to it is with other input prices and this is great example of what is going to happen in the commodity space. The Telegraph writes,
Researchers at Kyoto University achieved the world-first by uniting molecules of rhodium and silver, which do not naturally combine, through the fusion of ultramicroscopic particles of the metals after they had been reduced to a fine solution spray.
Each particle is a mere 10 nanometers in diameter, Professor Hiroshi Kitagawa told the Yomiuri newspaper, but the new alloy has the same properties as palladium.
Exports from China of palladium – which is a crucial part of catalysers for next-generation engines and serves to clean exhaust gases and absorb high levels of hydrogen – were abruptly halted in the wake of a territorial dispute between Beijing and China.
As commodities prices rise, technological substitution is going to be huge. Think the world will be the same with $100 plus oil? Think again!
Hope our leaders are preparing and start laying the educational foundation for the “new normal future.” Long engineers/short American Idol hopefuls and linear thinking economists
Global Macro Monitor 