Guillermo Calvo writes:
Incentives to stockpile commodities stem from the combination of low
central bank interest rates (especially in the US) and the growth in
sovereign wealth funds. The latter, in my view, is the crucial factor.
Sovereign wealth funds have been created partly with the intent of
switching the composition of government wealth from highly liquid but
low-return assets to more risky but much more profitable investment
projects. Thus, their attempt to get rid of excess liquidity resembles
the econ 101 exercise in which the student is asked to trace the
effects of a portfolio switch away from money and into capital. The answer is – of course – higher prices.
The piece is interesting throughout, hat tip to Mark Thoma.