Investing in the post-scarcity era

Looking at the crazy markets these days, I start wondering, whether we will ever return to scarcity-based markets, or whether this is just the start of economical over-abundance permeating all sectors.

So the starting point was that I started looking into the market of precious metals, mainly because the situation of fiat money is in, especially the trust in the USD being eroded quickly.

While gold is somewhat of a special case (since most “demand” is psychological), other metals like silver, platinum etc are, in my limited understanding, basically just commodities.

The market for silver which I follow, has been a pretty wild ride in the past year or so. 20% one-day swings. People and institutions placing huuuuge bets on silver futures. Accusations of market manipulation. Heated debates on “paper contract” silver vs physical silver. All the while geopolitics causing countries to stockpile.

There are two worlds here – the physical silver is apparently being drained from the markets. Supply is somewhat inelastic since it’s mostly a by-product of mining of other metals like gold, copper, nickel, etc. Physical reserves are being taken out from the major exchanges, but the market prices seem to indicate it’s a bear market (since 2026 at least). I’m not sure about actual demand, but silver is an essential component in new tech stuff like solar panels, computer chips, and those military equipments that got blown up in the middle east recently. China and US both starting to build strategic reserves.

So reserves in open exchanges down, supply inelastic, and demand probably up, at least hoarding by countries up. Yet despite volatile spikes, the trend of the silver price seems to be going down.

The moral of the story I take away is that, as long as the market is not (yet) in actual scarcity, and when either sellers are looking at the short (<1 year) term, or when the things can’t be stored for a long time, the price of things can be pretty arbitrary, and unimaginably low, despite tightening supply, despite inflation, etc. Until supply actually runs out and scarcity takes over, the price is basically set by the lowest price sellers are willing to sell at.

What happens when scarcity takes over? Just look at RAM prices for example. Suddenly the price is set by the highest price buyers are willing to pay. There can be a huge gap between the two.

All this is high school economics on supply and demand dynamics. The real question I want to bring up is actually this: what if in some sectors, there is practically always oversupply? And what if in most sectors this is the case?

This goes against traditional thinking where demand and scarcity drives markets and growth. But in recent decades first world economies have already been talking about “creating demand” precisely because the old paradigms require demand to drive the economy. We’ve already gone through a couple generations taught to consume overpriced overcomplicated things they didn’t need. Now the issue is that even this system is breaking down because human labor is now in oversupply, so there’s a time limit to how much you can give them debt and keep the system running.

Is this how abundance-based economics starts to develop? How does the transition look like? And more importantly, should “investors” with significant assets try keep hunting for the asset classes and commodities that are still in demand/scarcity, or is there some other way out?