According to the podcast, I don't think that the resources (in this case scrap metal) is being allocated in an efficient manner. Scrap metal prices are higher than ever and therefore people are less willing to buy the scrap metal. This puts producers in a difficult position as they need to make a profit but no consumer is willing to buy scrap metal at such a high cost. This is not due to one countries actions but rather the financial difficulties that most countries are facing at the moment. China, one of the strongest emerging economies in the world, was one of the top buyers of scrap metal. With the scrap metal, they made steel which is essential to many commodities around the world. But when the financial crisis hit China, they stopped buying the scrap metal and therefore the scrap metal prices shot up due to there being no consumers. This vicious cycle is what put the scrap metal industry at such a loss. When producers started getting their scrap metal sent back, even bigger losses were made. Such a problem is difficult to solve because of the growing distrust between producers and consumers. According to Alex Antikides, the scrap metal industry is an indicator of how healthy the economy is at the moment. With the huge losses on their hands, producers are likely to declare bankruptcy which pushes the supply curve to the left decreasing the amount of scrap metal sold even more. This indicates that the economy is not doing so well and that "the boom is over"
To solve such a problem is difficult because of the lack of cooperation and the vicious cycle that the scrap industry, like many other industries, have fallen into. According to the podcast, some are hopeful that with China's "massive stimulus package", China will demand for scrap metal again. One of the main reasons, in my opinion, why China stopped demanding scrap metal was because of the financial crisis that was occurring. Now with more money, China will be able to demand scrap metal again gradually bringing scrap metal back to a reasonable equilibrium. With this, the scrap metal industry, as a indicator of how healthy the economy is, will start to flourish again signifying that the end of the financial crisis is near. However, this all depends on if China is willing to pay the high prices for the scrap metal. Even with the massive stimulus package, scrap metal prices are still extremely high according to the article and it will hard to make a profit with the scrap metal at such prices. Only time will tell weather the scrap metal industry will once again flourish or continue to fall down the drain.
This long but interesting article talks about the relationship between the U.S and China concerning scrap metal: http://www.businessweek.com/articles/2013-08-29/to-a-chinese-scrap-metal-hunter-americas-trash-is-treasure
To solve such a problem is difficult because of the lack of cooperation and the vicious cycle that the scrap industry, like many other industries, have fallen into. According to the podcast, some are hopeful that with China's "massive stimulus package", China will demand for scrap metal again. One of the main reasons, in my opinion, why China stopped demanding scrap metal was because of the financial crisis that was occurring. Now with more money, China will be able to demand scrap metal again gradually bringing scrap metal back to a reasonable equilibrium. With this, the scrap metal industry, as a indicator of how healthy the economy is, will start to flourish again signifying that the end of the financial crisis is near. However, this all depends on if China is willing to pay the high prices for the scrap metal. Even with the massive stimulus package, scrap metal prices are still extremely high according to the article and it will hard to make a profit with the scrap metal at such prices. Only time will tell weather the scrap metal industry will once again flourish or continue to fall down the drain.
This long but interesting article talks about the relationship between the U.S and China concerning scrap metal: http://www.businessweek.com/articles/2013-08-29/to-a-chinese-scrap-metal-hunter-americas-trash-is-treasure