News

November 16, 2008

As Governments Attempt To Stimulate Demand By Investing In The Basic Fabric Of Modern Society, Miners Wisely Cut Capacity

By Rob Davies

A gathering of the great and the good from the largest 20 economies on earth this weekend in Washington will doubtless have kept many journalists occupied. But will it have solved anything or produced any remedies for the global recession we are now in that will help the mining and other industries? On past form the likely answer looks to be “no”, especially with a time-served US President in the chair who has no authority to enact any legislation that might be required. What needs to be done is to let markets take their course so that a new equilibrium can be established as soon as possible.

At the moment demand is collapsing, with just about every industry in every country experiencing economic slowdown or contraction to some degree. The plight of the US car industry is well known, and the cash flow problems of GM and Chrysler will almost certainly lead to some sort of financial crisis next year. Whether that will cause a complete cessation of activity is unknown, but it seems unlikely that the US Government will stand back and let Detroit just come to a halt. It might be bad news...