Wednesday, April 30, 2008

Supply and Demand in a Scarcity Market

Okay, I need help from you economically-brilliant folks out there. I just read this article that Mr. Wheeler posted on Mr. Smith's blog talking about scarcity markets and their impact on prices. I'm having trouble understanding the markets for, well, pretty much everything right now. And my main purpose is to try and put my understanding of prophecy surrounding the Four Horsemen and the Olivet Prophecy in a better context, at least to what information we currently have. So the gist of my question is:

Why is demand so high for basic resources right now?

Is it because there's a shortage of actual raw materials (unprocessed oil, grain, rice, copper, etc)? And/or is it because there's a shortage of production even with an abundant supply of raw materials? And/or is it purely psychological due to a shift in the balance of power, the falling dollar and rising nations of China and India and their resource demands? Is it all real need or just fear that we might need more resources in the future? Are things priced higher because demand rose suddenly when producers weren't expecting it and they're struggling to keep up? I understand the issues surround oil reserves, recognizing that tar sands, deep earth drilling and other new reserves deemed unprofitable until lately due to the price spikes. But do food and materials have the same issues? (I know we've already discussed corn here previously, too...)

And if we're not short on reserves for these various raw materials, but just lacking production or delivery methods, will catching up lower the market prices back to "normal" quickly? Are producers dragging their heels even though there's plenty incentive to hire more, drill more, dig more, make more, etc. with the higher prices? Or is there just too much fear that rapidly increasing production will rapidly decrease demand, thus bankrupting producers?

More importantly, if there isn't a shortage of raw materials, will these unstable markets create a shortage? Will they create famine? Will they cause nation to rise up against nation to fight for available resources? Will deep earth drilling cause major earthquakes? (Okay, that one's just me being silly, so don't take me seriously...)

It all makes me wish I took macroeconomics in college... It seems obvious that we're heading down the path of prophecy of the Bible, but I'm interested in thinking about just how it might all flesh out while we're getting there. Any input or perspective would be appreciated.

1 comment:

Kerr said...

My input? Depending on the professor, microeconomics will not help you understand anything. Sorry. Good questions though.