From Carmen Reinhart, Professor of the International Financial System at Harvard University’s Kennedy School of Government.
…..At this stage of the commodity cycle, price declines typically retain downward momentum. By the end of the boom, many commodity exporters had already initiated investment projects to expand production. As these investments bear fruit, the increased supply will sustain downward pressure on prices. And many emerging-economy governments’ understandable aversion to running substantial and persistent current-account deficits will lead them to counter weaker export prices by increasing export volume, even if that drives down prices further.
This commodity-price roller-coaster ride is probably not over yet. While we cannot know for sure what will happen, it would be prudent to brace ourselves for another drop – and do what we can to avoid a crash.
Read more at The Commodity Roller Coaster by Carmen Reinhart – Project Syndicate