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Metals Manipulation - Or Simply Deleveraging?
Seriously, who would object if the government forced the price of bread lower?
Where We Should Be Investing: The Paradox of Thrift
It took nature hundred of millions of years to create the oil in the ground. Mindless consumption has burned more than half of that oil. If we ignore oil imports, the remaining oil reserves in the US would not suffice to run the US economy for more than 5 years. Depletion of natural resources can not be compensated by more investment. People invest into oil and metals simply because they start to realize that these, although nonrenewable, are being wasted by the "consumption economy".
The Case for Gold Today
U.S. Oil Production Flat Over Past Four Years
The claim that oil production was constant during the past 4 years is most likely also wrong. Since 1971, the US production declined at the average rate of 2% per year.
Four Reasons for Silver to Be 2008's Best Performing Precious Metal
Most silver on the market is refined to 99.9%. What would b the relative cost of pushing purity to 99.99% ?
Alternative Energy for Investors: High Volatility, Great Promise
In my opinion, we should invest into renewable energy as long as the energy produced is much higher than the energy needed to produce this alternative energy infrastructure.
Promising Solar Power Technologies
Similarly, solar panels made from flexible thin film may be significantly cheaper than standard panels. But that advantage could be nullified by a possibly drastically lower life expectancy of the cheaper panels. The cost of a panel should be judged against the total amount of energy collected by the panel during its effective life time. The standard silicium panels come with a warranty of 25 years by their manufacturers. What is the warranty on the flexible sheet panels? 10 years would be insufficient.
Solar Stocks Feeling the Heat
Common Misconceptions About the Fed and Gold
In order to truly understand our monetary system, we need to look at it from the point of view of generating a stream of taxes to support congress and the general government. These tax collections have been rising steadily over the years, regardless of how the economy is doing. It is this rising percentage of the GDP which is collected by the governments which is the actual problem - not the fact that the Fed is officially a private institution. Although the Fed is a private institution, no Fed chairman will ever act against the will of congress or the US president.
Net Exports of Major Oil Exporters Likely to Fall
Let's assume further that peak oil will happen one day - that is a very reasonable assumption given that the earth can hold only a finite amount of oil.
Then we should be very grateful to the financial speculators since by artificially pushing prices up, they force us to lower our consumption of oil and in this way, direct our efforts to alternative forms of energy. In this way, when the true peak oil arrives (in 2030 by the most optimistic predictions), then we will be well prepared so that the transition to other forms of energy will be easy and relatively painless.
To sum, it would be foolish to prohibit speculation in energy futures. These speculators are in fact beneficial to our long term interest.
The Gold-Oil Ratio Approaches All-time Lows
Having said that, I agree with you that gold is a highly desirable metal. The main usage of gold is jewelery (wedding rings). In other words, we need gold in order to attract a woman. We need oil in order to give more than 6 thousand million humans the privilege to participate in the unfolding drama on this beautiful planet located in a tiny spot of the universe. Without oil, the human population would be much smaller.
The Gold-Oil Ratio Approaches All-time Lows
The Gold-Oil Ratio Approaches All-time Lows
I think the declining gold/oil ratio is just a reflection of a global revaluation process. Energy used to be extremely cheap, in the future all energy will be very expensive. My bet is that the gold/oil ratio will decline further towards a long term equilibrium value somewhere between 1 and 3.
Market Power, Asset Allocation and Oil Price
The production of crude oil in the US is declining since 1970. We produce today roughly 50% of the amount of oil we produced in 1970. That decline of production happened despite lots of drilling and the usage of the most sophisticated pumping technology in the world. It has little to do with politics but a lot with the geology of the oil fields. The remaining US oil to be pumped yet is less than 20% of the oil the US was originally equipped with before the oil bonanze started. In other words, we already used more than 80% of our own oil. What is left, could power our way of life for less than 5 years if imports were not allowed. Energy independence is a delusion.
It is a great tragedy that this simple truth, 30 years after the onset of the production decline, is still unknown to the educated people of this country.
Why Today Is Different From the Inflationary 1970s
The majority of all consumer goods sold today in the US is manufactured abroad, not in the US. The low cost of consumer prices reflects therefore the high productivity of foreign economies, not the productivity of the US economy. Secondly, these foreign made consumer goods have not yet been properly paid for (persistent trade deficits). We pay for these consumer goods not with our own goods and services but with financial assets (like US Treasuries). However, financial assets represent claims on future production of US goods. That is, consumer goods in the US are being paid for with promises of future US production of goods. The deception is in the fact that this future US production will never materialize, at least not at today's low prices (indicated by the looming bankruptcy of Ford and GM). In order to arrive at a correct figure of the consumer price index, one has therefore to take into account the growth of the total amount of US financial assets held by foreign creditors. This sum (many trillions of Dollars) represents the unpaid cost of imported consumer goods.
Looking at the second meaning of the word inflation, namely the growth of the money supply, then we experienced during the past 25 years an almost hyperinflationary growth of the money supply. That growth is visible in stock market charts, in the cost or real estate in New York City and in the level of yearly bonuses paid to people working on Wall Street.
To sum up, the past 25 years were indeed a paradise for consumers and people working on Wall Street. The price for these excesses has not been paid yet. But we can not avoid it in form of either a global depression or hyperinflation depending on how the central banks decide to rebalance the system.
There are no free lunches. This wisdom hold true not only in daily life, but also in macro economics as well as in financial engineering.