WS MoreOrLess: The numbers of 2013 - part 2
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What is the main topic discussed in this episode?
This is the short edition of More or Less, first broadcast on the BBC World Service.
Hello and welcome to More or Less on the BBC World Service. I'm Tim Harford. It is, of course, 2014. Happy New Year. But before we look forward, this week we'd like to look back at some of the most intriguing, striking or just plain delightful numbers of last year. And what better place to start than with Dr Pippa Malmgren, founder of Principales Asset Management and former financial market advisor to President George W. Bush.
For me, the most interesting number this year is the number 73. It's the periodic table number for an element nobody's ever heard of called tantalum. And yet, we're incredibly dependent on this rare earth metal. It's essential for all telecommunications, defense equipment. Your mobile phone won't work without it. And I think it's interesting because it serves as a reminder that in the world economy, lots of the most important things that we need are actually very limited in the supply. And there are lots of things that in the world economy that we need to think about the limits on the supply. And I don't mean this is like a tree hugging green person. It's not an environmental issue. I mean, we assume that there's always enough finance to pull something like tantalum out of the ground.
When in fact, we continue to have a problem with banks lending because they're so inhibited by their own debt problem. Food is another issue. We sort of assume that somehow, yes, with technology, we'll be able to feed the world. We forget that phosphates are essential to the production of food. And like tantalum, it's a rare thing. It's hard to make. And to build a factory today that can make phosphates, you won't get any return on your capital for 15 years. So right now, nobody's prepared to fund that. So this is another example of things like mined assets. We just take for granted that you pull stuff out of the ground when you need it. What's the shortage of talent today to dig the stuff out of the ground?
For the last 25 years, if you had any math skills, you went into finance because that paid the most. And I think this year is really interesting because it's the first year that the graduates of the Colorado School of Mines, which is America's best engineering school, will be paid more than Harvard Business School graduates today. thus enticing young people with math skills to actually go back into the real economy, which is a great thing. But it means we've also got a global shortage of engineers right now. So again, you assume if you need something like tantalum, you just get it. Yeah, well, guess what? We don't have enough engineers and we probably won't for some years to come until we fix and redress this imbalance.
So tantalum, we really literally wouldn't have the global economy we have today without it.
Pippa Malmgren. My next guest is Merrin Somerset-Webb, the Editor-in-Chief of MoneyWeek.
My number of the year this year is $142 million. That's the price that a set of three studies by Francis Bacon sold for at auction at the beginning of November. That is the highest price ever for a piece of artwork at auction in nominal terms. And to me, this shows us the way that quantitative easing across the world has leached into real asset prices. We knew it would happen. It was forecast by the central banks. But I think it's happened to a slightly more extreme level than any of us really expected.
So quantitative easing is printing money, to put it crudely, or central banks creating money.
What rare metal is essential for mobile phones and why did 2013 highlight tantalum's importance?
Why would that drive up the price of Francis Bacon paintings?
Well, there's an awful lot of arguments about how quantitative easing money gets into the asset markets. But the best way to look at it, I think, is as though it's a hot potato. So the central bank buys an asset from somebody, buys a bond of some kind, whatever. hands the money to the guy who had the bond. The guy who had the bond now has the money. What's he going to do with the money? He's going to buy something else. So maybe he goes and he buys an equity.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–3:38
2
What rare metal is essential for mobile phones and why did 2013 highlight tantalum's importance?
3:38–4:52
3
How do supply limits on minerals like tantalum and phosphates threaten the global economy?
4:52–6:11
4
Why are banks' lending constraints affecting extraction and production of vital resources?
6:11–9:33