Financialization

A term that emerged around 2010 to describe speculative forms of investment in commodity markets. Investors are motivated by a mix of risks and expectations of long-term returns. Whether, and if so to what extent, financialization tightens supply in the spot markets and thus influences prices has been a matter of debate to date, especially since transparency is widely lacking in many of the markets. – However, the preference of many large investors, such as banks, hedge funds and even insurance companies, to store exchange-traded industrial metals on a long-term basis and thus remove them from the production process, which emerged in the wake of the subprime crisis and then, above all, the ECB’s low interest rate policy, is viewed with some concern. Meanwhile, the rising price of nickel – as has been convincingly demonstrated – is now bringing substitutes into the focus of processors. This reduces the pressure on prices for the scarce metal. In the end, it is not impossible that the metal hoarders may even suffer a loss because the metal-processing companies have turned entirely to the substitute. – The increasing weight of the financial sector in an economy (a shift of significance from the real to the financial sector in an economy). – See biofuels, cost-push inflation, petroleum-food nexus, petroleum price, money arithmetic, Henry Hub, inflation, global, metal inflation,
Yield chasing, protein inflation, commodity bubble, commodity futures contract, two-pillar principle, second-round effects. – Cf. ECB Monthly Bulletin of October 2011, pp. 13 ff. (financialization of commodities presented in detail; overviews, references), Financial Stability Report 2011, pp. 42 ff. (increase in financialization; associated risks; references), BaFin Annual Report 2011, pp. 44 f. (approaches to global regulation of commodity markets).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
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