Oil, Solar, Wind and Water Don’t Mix

Posted on

2005-2015-Oil-Prices
It would seem that the Saudis want every one of their oil competitors to go bust in the attempt to tear down the shale oil revolution, only to push oil prices back up again in the future. But do they still have control of the market? Judging by the persistent weakness observed in the oil market, it seems that everything is falling apart, all around the Arabian peninsula. And given events in Nice on Thursday, and Turkey yesterday, it appears that turmoil, is extending further afield.

Oil prices have still not fully recovered from the lows seen at the peak of the financial crisis (in February of 2009). If the current trend remains in place, the market will remain subdued for an extended period. On the one hand, this maybe exactly what the Saudis, and to some extent, the Iranians, want, in order to regain their market share and push other recent entrants out of the market; on the other hand, given that the worst of the recession is behind us, with prices  now in the $50-$60 range, that would still be below marginal costs for many oil exploring areas. In fact, one could ask whether these low prices are just the result of OPEC’s output decisions or whether they hide other developments.

Saudi Arabia’s task has been easier than it could have hoped for, due to a mix of international developments. Unlike events in 2009, when oil prices were boosted by a declining US dollar driven by the FED’s massive asset purchases, now QE has for the moment ended, and the interest rates are being talked up again. Anticipation of this event alone has driven the dollar higher, although weakness of other currencies has also contributed, (Brexit, of course, making the pound particularly vulnerable) which has had a negative impact on commodity prices in general, and of course, oil in particular.

2016 – US Outlook

While a rise in US interest rates would have a direct negative impact on oil prices, the eventual effect is usually positive. The reason for this is the fact that a rate hike usually comes at times when the economy is improving and we would then see rising economic activity. This would usually come with higher aggregate demand, which would boost the appetite for energy products.

However, as suppliers attempt to increase production to fill the higher demand for their products, this may be limited as fracked wells do not respond well to just opening spigots, they require more wells, and this requires capital. So, this time, not even an improving US economy might be able to spare oil these losses. Many feel that the excess oil production has been so large for so long, with stocks piling up everywhere, that more demand will merely offset the surplus effect stemming from aggregate output. But that may be just half the story.

Back in November 2015, the IEA predicted a rise in demand for oil of less than 1% per year until circa 2020 and modest growth rates thereafter. If these predictions transpire, it may take years for the current stockpiles to normalise and, unless OPEC and the wider world cuts production, the bearish trend for oil prices may continue for years.

This bearish oil market, is the consequence of depressed demand and over-production, and may not be reversible for several reasons.

The world is in an unfavourable growth scenario, with the US running at the front of the developed world pack, but Europe is still struggling with the aftershocks of the global recession. At the same time, the threat of rate hikes in the US is hitting oil prices and leading to capital outflows in the once high-flying emerging economies.

If the number of SUVs with new more efficient engines, Toyota Priuses, Nissan Leafs and Teslas, I’ve seen locally is anything to go by, the world is moving away from its oil dependence for transport. China is no longer hungrily demanding raw materials to grow its economy, as it moves from an investment-driven economy towards a more consumer-orientated one. Given the China outlook, any change in demand is likely to be lower, and lead commodities into a further bearish market. Because the finding and extraction of raw materials takes years to achieve, past decisions to expand capacity will take time to be reversed, as countries and companies adjust to the new reality. In the meantime, prices will take care of the imbalances but huge volatility is expected. In fact Dr.Kent Moors, sees problems for the oil production companies in the U.S., for a few years yet

So these and other important shifts in the world, – Wind power, Tidal, Solar, and increased Nuclear, with increases in efficiency are all taking their toll. Faced with high oil prices and being dependent on a small group of countries, governments and companies in oil-dependent countries invested in the development of these new energy sources and improvements in the efficiency of the existing ones. Cars, household appliances, consumer gadgets et-al, today need a fraction of the energy they once did.

This means that for the oil market to remain stable and growing, needs higher global GDP growth rates than hitherto. Unlike what many predicted decades ago, it won’t be the supply side controlling this market, leading prices higher, but rather a suspicion of ever decreasing demand. Saudi Arabia may already not be in control of this market and may run into trouble, along with any other entity that is dependent on petro-dollars. Of course, the value of the dollar, as well as whether oil is marketed worldwide in dollars, will ultimately define markets. But reports of a 45% split between oil and the water that is used in the waterflood of old oil wells, is also increasing costs of extraction for Saudi fields, and thus requires a higher commodity price, to balance Saudi national budgets.

Shares in the biggest oil companies trading in the FTSE, like Royal Dutch Shell and BP, lost 40% in the last year before their bounce back in recent months. In less than a year, oil prices retreated 60% and these companies couldn’t avoid the downturn. Smaller companies, including low-cost producers face an even bleaker outlook, as share price declines have surpassed 80% in many cases. Companies operating in the shale oil revolution have been decimated and many won’t be around by year end.

2016 – OPEC Outlook

If OPEC has in the past helped to boost a number of energy alternatives and driven gains in user-efficiency (via higher oil prices), they are now contributing to the development of improved technology on the supply side, as the low price is a great incentive for the remaining companies to increase cost efficiency. A low price will certainly drive many companies towards bankruptcy, but will also force the surviving companies to become highly efficient. Oil projects in remote areas or regions with high risks (being economic, political, or of any other type) will be delayed indefinitely, but part of the shale industry in more productive areas will remain. That industry has effectively placed a cap on oil prices. OPEC won’t be able to drive prices above a certain level, because many companies would enter the market again and force prices down.

The strategy followed by Saudi Arabia has severe shortcomings. This is no longer about the shale oil industry but also about OPEC members. The high production strategy is crippling growth, leading to capital outflows and increasing budget deficits in all OPEC members. Venezuela and Angola are heading towards complete economic and social chaos, with growth spiralling down and oil income not enough to finance government spending.

2016 – Angola & Venezuela

At the beginning of 2007, one US dollar would buy 75 Angolan kwanzas. In early July this year the exchange rate stands at 1 to 165, as a result of declining oil prices. That’s a decline of 50%, but the official rate doesn’t even reflect the observed reality, which is that people aren’t able to get US dollars from banks, and instead are forced to exchange them on the streets at a rate of 1 to circa 300. Many construction companies are already shutting down their business in the country, as the government is delaying payments.

Venezuela, is in even worse shape. In 2011, the Venezuelan Bolivar was 4.3 to the USD, but today stands at circa $1:10.0(VEF). This loss of purchasing power, caused riots after Hugo Chavez died, and the oil revenues upon which the nation depended, bought less and less on world markets. Queues for such luxuries as Toilet Rolls were seen, and the Socialist miracle of Venezuela, is gone, possibly for good.

Angola and Venezuela are the weakest links in the OPEC group and are thus expected to be the first to experience a deterioration in their financial positions following oil price declines. But they won’t be alone in the medium term.

The Long and Short of the Oil Market?

Take the Saudi Arabia case, for example. The country had a debt-to-GDP ratio of less than 2% at the end of 2014 and foreign reserves of around $738 billion (at today’s exchange rate). In a country where people don’t even have any experience of taxes, there seems to be a lot of margin to drive all others bankrupt before feeling the heat. Nevertheless, the country lost $90 billion in foreign reserves in the year to October. If this pace continues, the country will run into trouble in a matter of just a few years. From a balanced budget the country is going to hit a deficit of near 20% this year and another 20% next year (as predicted by the IMF). Oil-producing countries in the Gulf are already tapping money from their sovereign wealth funds to keep afloat.

OPEC long ago shot itself in the foot and will never recover from the damage. While Saudi Arabia tries hard to bust everyone, let’s enjoy the lower oil prices as consumers. As investors, or traders, it may be time to look for something sweeter than oil like cocoa and wait for the markets to stabilise, as price declines aren’t over yet. In the meantime, perhaps time to sell any oil-holdings, and time to buy, commodities that are undervalued and thus oversold? Can you say Gold, Silver, Platinum, Palladium or Crypto Currencies?

Silver Escapes the Chains.

Posted on Updated on

BreakingChains

Over the week-end of the fall-out from the BREXIT referendum, the markets were in turmoil.

The pound fell against the dollar, and the dollar fell against other assets such as Gold, Silver, and other precious metals.  The dollar, also rose against the FT and the DOW… as did the pound… But, the problem for Britain is, or has been, the perceived strength of the dollar, as much as the perceived weakness of the pound. But the Swiss Franc too, is suffering as people have rushed to hold it, raising its strength – making negative interest rates the only tool that the Swiss Central Bankers have to weaken the  Swiss Franc (CHF).

What gives?

It is true that the markets are a discounting mechanism, but what one misses when there is a period of uncertainty, is that traders get out of the markets. If you are not absolutely sure which way the markets will move, as a professional trader, you sit on your hands. So, the shorts will have closed, perhaps causing the spike in both Gold and Silver over the intervening period. Gold is to the markets, what silver is to a vampire… The antedote, the bullet in the heart. And when uncertainty reigns, then you have to have it.

Alan Greenspan, ex Fed Chairman, has even gone back to his original premise, that we should now be considering returning to the Gold Standard amongst other things. (The Greenspan Gold Bug?) – You can see the Greenspan Bloomberg interview there.

If you have read this blog for a while, you will know, that many moons ago – back in the sixties, before the good Chairman was enamoured with the reins of power at the Fed, he advised that the Gold Standard was a way of constraining overspending, and getting something for nothing. In the above video, he calls himself a “Gold Bug”, though this appears to have passed him by somewhat during his time as Fed Chair.

When one person gets something for nothing from the economy, it matters little, but when half the population is doing it, either through tax subsidies, transfer payments (that’s fancy talk for social security, working family tax credits or whatever name is given to it) then it WILL cause problems. Greece, and the other nations on the Mediterranean in Southern Europe, also need to heed this warning.

Of course, when we have major dislocations in the economy, for whatever reason, then we hope that governments will help to support those who have been dislocated. The issue becomes a major problem, when human ingenuity is curtailed, because they see a soft option of just taking money from the state – who get their money from us. Whether that is through taking money for government contracts for F16 fighters, or whether that is enough to buy a pint of beer at the weekend.

So, when governments overspend, the Central Bankers, or the people who control them, who know how this game works, have the strategic goal in mind of being the power behind the throne, and ultimately of the world, then they will give us enough rope to hang ourselves. So it is incumbent upon us, to rein in spending for all but the most deserving cases. Mass immigration will of course mean more tax-paying citizens, and that is a good thing, but immigrants, particularly in Europe, who live in a world where they are just an hour and a short 2-3hr flight away from their original home, can just as easily disappear again, taking their earnings, spending power, and taxes with them.

If you remember back in the dim and distant past, I said that silver will once again begin its rise to the stars, and the major resistance level of $18.50, was shot through over the U.S. holiday week-end. In fact as I write, Silver went through the $20 mark to $20.70, only to fall back to just below $20 at circa $19.75, before settling above the $20 mark again. This suggests, that those who watch these things, have closed out their short positions, perhaps leaving themselves un-exposed over the week-end, of the U.S., July 4th holiday period, and are now expecting the next signal to be upwards.

Absent any major shorting of silver, which to my mind would be tantamount to financial suicide, the silver market is now facing the reality I have talked about for so long.[See Pic]

Silver_1_year_Price_20160706

The Chinese Central Banking Authorities, have been buying Gold, as have the Russians, and selling treasuries to fund it, (see Image Below) and because the Indian authorities imposed an import tax on Gold, (which they’ve now reduced) the canny Indians have been buying silver in their droves. I too have dipped a toe back into the water, so I nail my colours to the mast.

EndOfDollar(3)

Here, in this video, David Morgan of the Morgan Report gives clues as to where he thinks we are headed, and also gives a few tips as to when you should unwind your position in silver (should you have one).

If you saw the previous reports that predicted a rise in prices, and if you saw the video above where ex-Fed Chairman suggested that M2 money supply, which had been growing steadily, has in recent months grown at a higher rate than the trend, which suggests inflation is on the way.

The indicator that inflation is coming, is a rise in prices of raw materials – including precious metals. Trying to stay ahead of the game, means owning them, and you can do that at Liberty Silver

And for those interested in getting into the Bitcoin space, perhaps this will give you some encouragement…Especially, if you look at the price over a five year period… https://www.coinbase.com/charts

If you are still curious, but not keen to spend large amounts of money to get involved, then going to FREE Crypto-currency, to get yourself a crypto-currency account with daily deposits (rather like interest on your savings?) which is one way to protect yourself.

What many failed to have noticed though is that the Brexiters achieved in one night, what Gordon Brown, Mervyn King, and the current Goldman Sachs apparatchik – Mark Carney- had failed to do with 15+ years of loose money policies… Lowered the value of sterling, making our exports cheaper, and our imports dearer, and in so doing, made them less likely, potentially rebalancing our trade deficit, and reducing the “Pull” factors on mass immigration by lowering the value of wages and benefits, but also raising inflation…

Not bad for a night’s work…

But here, former Presidential candidate, and Texas Governor, Dr Ron Paul, gives his thoughts on the reasons for, and the outcomes of the referendum: You be the judge.

And finally…

So WHY are we predicting a new collapse greater than 2008?

Here are some unpalatable facts:

1) The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.

2) The derivatives market that uses this bond bubble as collateral is allegedly circa $700 trillion in size.

3) Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.

4) Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.

5) The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.

6) The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

7) In the last week, the IMF indicated that the German bank – Deutsche Bank, is the most systemically linked, and systemically stressed of any bank in the world… Is this the next Lehman moment in the making?

Are you prepared yet?

How Britain shot America in the back…

Posted on Updated on

Folded-US-Flag

Some months ago, I speculated that the end of America as it currently stands was nigh, and that the trade deals being done between China and 27 other nations on mutual trade and currency which excluded the dollar would probably be the undoing of American hegemony, and the potential deal to sell oil from the Kingdom of Saudi-Arabia, to China in Renminbi might be the shot heard around the world (link) stabbing at the heart of the American dollar system..

But, while America was facing the far-east, trying to watch what was happening in the South China Sea, with islands and atolls being beefed up with runways for the Chinese military, on the other side of the Atlantic, one of America’s staunchest allies – Great Britain, with its political establishment in London, by joining on December 3rd 2015 the AIIB, (The Asian Infrastructure Investment Bank) which was initiated by the BRICS nations, with Russia and China at its heart, and where China still has a majority holding, shot the U.S. in the back.

And those who oversaw this, are the same political party who offered the people of Britain a referendum on their membership of the EU, and the British people – fervently in favour of their independence – shot the Americans in the back a second time, despite the most dire warnings that they would suffer the consequences.

The BREXIT referendum was brought about because there were many in both major political parties frustrated by the increasingly powerless way they were unable to adapt the nation, and who were constantly informed by their respective constituents on their growing concern over the march of globalisation, and free movements of huge numbers of people. The conspiracy theorists, have speculated, that creating political instability in the middle-east, which was planned in the aftermath of the 9/11 attacks on the world trade centre, was in reality, a covert CIA False Flag event to provide the “Event, Reaction, Solution”, that people such as David Icke, Michael Ruppert and others have spoken of, and that may lead us back to the world as it was in 1930.

The events in Istanbul recently, with the loss of 40+ lives, coupled with events in: Mumbai, Paris, Morocco, Belgium, Madrid, and London, over the last decade and more, have made people fearful of the other, but also, very concerned as manufacturing companies, that provided steady if boring but well-paid jobs, were going to countries with lower wage costs, robbing the working-class in Labour heartlands of their livelihoods and giving to a foreign workforce who were eminently capable of using and maintaining the equipment used to produce those goods, and could quite easily meet those manufacturer’s needs.

Political machinations have become particularly difficult as Jeremy Corbyn, leader of the Labour Party faced a vote of no confidence too, and lost – 172 to 40. A vote overwhelmingly against the leadership, but he apparently is unwilling to step down.

The backlash against the leadership which supported the Free Trade Agreements in Europe, and the wider world, cost many of Labour’s traditional supporters their jobs, over many years. World Trade we were told would enrich us all and was necessary as the most efficient and effective manufacturers lowered costs, and led ultimately towards cheaper goods and services. But TPP and TTIP which were being encouraged and lobbied for by huge American Corporations will be the end result, granting those same major U.S. corporations legal status above that of nation states, over-turning democracy after a mere 200 years… The same corporations that the conspiracy theorists believe, already have control of the planet, through shady cross-holdings, and family offices and trusts.

But was the referendum result the first wake up call for disenchanted populations around the world to rise up against the political establishment, and against the small group of Americans, and Central Bankers who control the world?

The latest news, according to James Dale Davidson – economist famous for predicting many of the problems of the last 30 years, and who appears to have been a confidante of senior political figures including Henry Kissinger, Margaret Thatcher, Ronald Reagan, George Bush Snr., Bill Clinton and many others, is that a 57 nation alliance now stands against the American Dollar Reserve System. (See below)

EndOfTheDollar(5)

This alliance, he claims, are intending to bring down the U.S., and intentionally attacking the nation. The effects of which will see the Americas’ stock-markets tumble upto 50-60%, housing values fall similarly, the value of the dollar will fall 80-90% against a basket of currencies and this will wreak havoc with ordinary American’s lives leading to memories of the 1930s soup kitchens and food lines.

It used to be said, that when America sneezes, the world catches a cold, but with the growth in the BRICS nations in recent years, particularly India, and China, with 2.5 billion people between them, this perhaps is no longer quite so true. And perhaps we are about to find out as the U.S. is brought down off its high horse…

…and the one nation that stood alone against giving America the power initially in 1944 when, 44 nations signed the agreement at the Bretton Woods Hotel, was the Russian dominated Soviet Union, who now have the strongest Gold and financial reserves of any of the major economies. Her National debt is just 11% of GDP, against over 100% for many western economies, and according to one source at least, it has 20,000 tonnes of gold in its reserves. Of course with such a huge land mass, Russia also has huge oil and gas reserves, and is one of the three biggest producers of oil in the world achieving circa 10 million barrels per day. But since the fall of the Soviet Union, and after adopting a more capitalistic economic policy, the mathematical and engineering prowess of the Russians is once again beginning to shine through in technological achievements.

So, the only thing that stands in the way of the nation enjoying the same standards of living enjoyed here in the west, is if their bankers are allowed to take the same course of action, that has enslaved us all here… through gross expansion of the currency, using funny money, conjured up out of ink and printing plates, or computers of the central bank so say the Bankers. Putin favours a different course, which in alliance with China, and the other BRICS nations, will see Gold re-emerge as the arbiter of nation’s wealth. China too has been hoarding this most precious of metals. And while doing so…Bill Bonner of Agora Financial fame had this to say…

“Vive la Revolution!

The appeal of the welfare state ceases when people get less welfare than they pay for.

The more wealth and power the elite sucks out of a stagnant system, the more the typical citizen feels trapped and robbed.

The Brexit vote was an attempt to escape.

And in the U.S., many see a vote for Donald Trump as another way to get parasites off the backs of the common people.

Mr. Trump has pledged as much. The presidential election this November, he says, will determine whether the U.S. will be “ruled by the people or the politicians.”

“I will end the special interest monopoly in Washington,” he promises.

The situation is not completely unlike France in the 1780s.

So many foxes had burrowed into the privileged, elite classes that it became impossible to get them out.

They lived on “rents” – such as the right to collect taxes, or tolls, or a percentage of harvests. They were 18th century cronies, not productive members of the economy. And generally, they were even exempt from paying taxes. This left the typical French royal subject with a chip on his shoulder.

Several efforts were made at reform. Assemblies were called. “Parlements” were convened. Elections were held. But the rich foxes wouldn’t give an inch. It took a bloody revolution to change things.

Similarly, today, the foxes have a sweet deal. Their money system gives them an almost bottomless source of credit. (Thanks to negative interest rates on bonds, many governments around the world now get paid to borrow money.) And they use this credit to fund their programs… their bonuses… their stock buyback schemes…

Naturally, they are desperate to keep it going. Bloomberg:

Central banks across the world offered the financial system fresh funds and intervened in currency markets, in an effort to reassure investors sent into panic by Britain’s vote to leave the European Union.

After a majority of Britons voted to end their 43-year membership of the EU in a referendum, the Bank of England, the European Central Bank and the Bank of Japan issued statements stressing the availability of liquidity to keep the banking system running.

But there’s a problem…

The Deep State can control Congress. It can control the state bureaucracy… Wall Street… and Big Business. It can even – usually – control the voters.

But it can’t control the credit cycle.
Regards,

Bill Bonner

And on that note, I’ll say thanks for reading…

And to those who followed my lead by buying some silver, a while ago, I say a hearty, “Well Done!”, as of late last year the price of silver was circa $14.00, as of last Friday (1st July) the price was nearing $19.20 at the close. Is that the end of this rise? Well if you have read any of my posts over the last three years, you will know the answer to that one.

If you like this don’t forget to share it, tweet a link, or just click the like button.

Brexit – 30 years in the making.

Posted on Updated on

brexit

As the political machinations and recriminations begin on the back of the momentous decision to exit the EU by Britain, I can’t help feeling those who comment on these things have still not grasped why this happened.

David Cameron has tendered his resignation, and two Labour Party MPs, have tabled a motion to ask Jeremy Corbyn to resign as party leader facing a vote of no confidence.

An Oxford psephologist was wheeled onto Radio 4 yesterday to explain why the events had unfolded in the way they had.

And the British population, stands like a punch-drunk Boxer in the twilight of his career, who is given one last shot at the big-time, and hopes to give his opponent a knockout, or a bloody nose, but who stands numb-struck over the prostrate corpse in the ring as the final bell sounds. His head racing with thoughts. Will I be prosecuted? What will happen to me? Where will they take the body? Whose fault was it? Why didn’t they see this coming?

But this exit has been brewing for quite some time.

In any organisation, there are 4 kinds of people: Strategic (Senior Management, Directors, Chair etc) Tactical, (Middle Managers, Analysts, Creatives, Designers, Financial Staff, Personnel etc) Administrative (Secretarial support, PAs, Clerical grades) and Operational… (Every body else who does the service or produces something)

In smaller organisations, quite often, many operational tasks will be carried out by a few people, or they will share tasks making jobs varied, meaningful, interesting, and relatively secure and as a result unless a major downturn occurs, anyone working in them will feel appreciated, worthy and thus the worker will have self worth and a stable income.

Since the start of the 1980s, with the march of globalisation, more and more of the well-paid, but dull jobs have been either automated, exported to the far-east, or had the wages driven down to poverty levels. The increasing use of agency workers leading to inconsistent income, as peaks and troughs skewed demand, seasonal work and zero hours contracts, meant people could be laid off at will, and this devalued the workers output.

Those workers who work through the night to ensure that the parcel ordered at 5pm, arrives at the client’s desk the following day, means many now work long unsocial hours, are out in all kinds of weather, and are forced to wear hideous high-viz clothing that renders the wearer invisible to the opposite sex – all in the name of Health and Safety, and those in cinderella occupations – Trawlermen, Farmers et-al, all have an axe to grind.

In larger organisations, operational staff have been driven to despair as instead of employers competing for workers with higher pay, employees have had to compete against workers recruited from overseas willing to work for whatever they can get, just to get a foot in the door.

Those native workers felt aggrieved, and rightly so. If a chicken preparation producer can’t get workers for £6.50 an hour, then the answer in a social market world should be, to pay £7.00 or more, raising wages until recruitment and retention becomes less of an issue, drawing workers from other less well paid positions, or drive automation as a way of controlling costs – a market in operation.

Ever since the dark days of the 60s and early 70s, the British worker (operational staff) with his/her heightened sense of fairness, has fought for fair play in the workplace – ” A fair day’s pay, for a fair day’s work.”

Historically, it was Britain’s people who rose up against the Monarchy in 1215, to seize rights which were documented in the Magna Carta. The right to free speech, the right to freedom from arrest, unless the accuser issued a writ setting out the law that it is alleged to have been broken. Again in the 1600s, Oliver Cromwell outraged at the long Parliament attempting to give itself another period in office, chose to raise an army so that the people of Britain, could throw off the monarchy, and elect, and deselect those people to represent them in Parliament according to the law.

It was 1984, in the George Orwell book of the same name, where the people were pawns in someone else’s game. At the time, Mrs Thatcher, was manipulating behind the scenes, the politics of coal-production, when the man who was charged with bringing about a change to the deep mined coal-pits of Britain – Ian Macgregor, built up his coal-stocks, got an agreement to move the negotiations for pay deals, from the winter months, to the summer, and then engineered the strike, that would cause the whole of the country to schizm on one side of the political divide or the other.

That political divide and the hurt that went with it, stayed hidden beneath the surface for decades, smouldering, as the once proud mine-workers could no longer toil in the industry that made them men, earning a wage to support themselves and their families, they could no longer hold their heads high in society, and feel they were making a contribution, while building life-long friendships in the close-knit communities that had grown up around the pits, often with local vernacular, not heard more than five miles away.

The engineering businesses in the east midlands, the glass industry in St. Helens, the Chemicals industry in nearby Widnes, the cotton and wool mills in Lancashire and Yorkshire, and the steel mills, that had grown up around these pits – particularly where men built things with their hands and took pride in their work had gone overseas, and here too, these men were emasculated, as the nation re-engineered itself around service industries, and with it went the jobs that would support whole families of perhaps 3-8 children, to be replaced with jobs in call-centres, warehouses, trucking, and of course retail.

Those men, educated (or not) as they were, for hard work, physically demanding work, are not naturally equipped for these new industries, and many never got over their loss of prestige, and income, while “down south”, the Yuppies, drove their Porsches, BMWs, Jaguars, Audi Quattros, and generally lived the high life, as the “City” had been de-regulated, and money was now greasing wheels.

This pain felt, was made all the more hurtful, when as we were ejected from the ERM, George Soros, built his fortune, on the backs of British taxpayers who were forced to pay an estimated £27 billion, for Norman Lamont’s attempts to defend the indefensible, while George Soros, personally made close to $1.5 billion, that day. Some of these new workers would be lucky to make £50.

The emergence of New Labour with its trio of architects – Peter Mandelson, Gordon Brown and Tony Blair, it was hoped, would rebuild the fractured society, and give dignity back to these working men, but it was soon realised, this was not to be, as promises made to the city to “Live within our means”, bought support from the well heeled Bankers, now funding their prawn sandwich lifestyles, and their political aspirations as Britain’s financial services industry ballooned, giving Gordon Brown enough to achieve some of his long held dreams for Britain. PPFI (Public/Private Finance Initiative) meant if you worked in a QUANGO, or the government sector, you got security of income, fancy new offices, new hospitals, and/or schools, while those in factories, trucking, shipping, farming, got insecurity, low wages, or were fed crumbs from the table of European support grants.

These workers of whom I have spoken, do not concern themselves with the stock-markets – they have no shares, they do not concern themselves with pensions values – they have no pension, and their house is not mortgaged to the hilt – they can’t afford to buy.

This political event occurred precisely, because British politicians failed to get, or keep in touch with ordinary working men and women. The British are the most tolerant nation on Earth, but they have a high sense of fairness, and as a nation, they felt like there was no political party that understood and spoke to their needs.

As a former Lecturer, and Software Engineer, former I.T. consultant, former manager, Chairman of the local party during the early 80s and a former local councillor, as well as worked in Recruitment, and seen close-up what temporary staff have to endure, I have given it an enormous amount of thought. Despite 3 post-graduate qualifications which appear not to have been money, time or energy well spent. Men of my age, cannot compete with a 30year old man from Poland in the speed stakes, nor do we have the drive and determination that fired our enthusiasm, when in our 20s, when it was easy to make improvements to the workplace around us. Now all operational inefficiences have been squeezed out (at least in the private sector).

But also, what many have failed to see is that, if you are a mainland European, or from the African continent, or middle-east, which language do you learn as a second language, given that English is now the Lingua Franca of the business world, and therefore, which country do you go to, if you have a second language and want to get on?

Where is the political party speaking for ordinary British workers like that? During all the Brexit debates, only three people have even remotely touched on these subjects: Lord Owen, Nigel Farage, and Frank Fields.

This disparate group in their own way have understood, that without political control that responds to an electorate, we live in either a technocracy, or a dictatorship. None of which Britain’s workers voted for in 1975, as I did.

Brexit, was the only logical solution to a problem of mass movement of people, from those parts of the world where law and order are at the beck and call of those in power. Only in the Anglosphere, are the lawmakers subject to the common law and thus the servants of the people, rather than masters over them.

All those workers at the bottom of the economic heap, kicked the political and managerial elite in the groin: it’s not their racism, but a desire to want to stop the exploitation by management, and a high sense of hurt.

BUT, unless those in power recognise this, we will return to a world of the 1930s, as nation blames nation, and we know where that led.

And here, we see why the British needed to take back control of our Independent Financial, Political, and Military policies…

 

 

 

The Eighth Wonder of the World… And a Curse.

Posted on Updated on

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” [Albert Einstein]

EyeOfTheStorm-Now

  1. 2008 – 2012
  2. 2012 – 2016
  3. 2016 – ? (2018-20?)

We are emerging from the eye of this particular storm…into more turbulent times ahead.

Uncertainty in politics, breeds uncertainty and volatility in economics and markets. People postpone major purchases until they have a clearer idea of how things will unfold. And businesses too, judge the future and make investment decisions accordingly. But the Debts built up during the 2008 crisis, have still to be repaid, and will now begin to unwind, or lead us into hyperinflation.

Having money in a bank account, that earns interest, is a distant memory for many people, as interest rates around the world have been reduced, eliminated or worse.

Britain’s and Western National Debts, have an interest charge levied on them, which is being, at least in part, controlled by the Federal Reserve, who came to Europe’s aid (again!) when it loaned $15 trillion during the heat of the last financial crisis. Britain too loaded itself up to the neck with debt, to help its banks, and latterly, International Banks from Greece, Spain, Ireland, and Portugal. and its current account is, as I have mentioned an enormous debt of — £1.7 Trillion. At a modest 0.0025% (¼%) that translates as …

Drumroll… £4,250,000,000 per year. (£4.25 billion…) However, even a modest increase to say 2% p.a. over the next 2 years, will likely kill the British economy, and with it, any hopes of a full recovery.

At 2% our debt repayments are: £34,000,000,000 – (£34 billion) enough to build approximately 50 new hospitals and staff them for a few years. Who said being a banker was easy?

But this image from Raoul Pal, tells the even bigger picture (even if it is a couple of years old).

Debt-2-GDP-Ratio

Whose debt is biggest?

The debt to GDP ratio includes pension and other obligations.  Is this why Britain’s politicians are so keen to import foreigners, to help pay off this debt?

Those savers who have worked hard all their life, and tucked away a little for their retirement, are earning precious little from their savings. Funds that perhaps they have ear-marked for a retirement home, a secure retirement future knowing that their money is safe in a Bank, or where they can get at it quickly, in the event of an emergency, to meet unexpected bills are shortly going to experience the greatest loss of value in their lives, through inflation.

In a world where money is finite: interest rates serve the function of allocating money to its competing potential users. Those that require investment money will bid for this scarce resource, driving up interest rates, in times of high demand. This rising interest rate trend signals to the business community, that there is high demand for money, and this can indicate that businesses are expanding, or that competition is increasing (usually early in the market cycle) and those who seek to spend for their current enjoyment, begin to realise that they cannot afford higher payments, and thus this slows the economy as spending is curbed.

When currency is infinite as is with Fractional Reserve Lending: the only brake on increased amounts is the Banker’s concerns as to whether they will get paid back, or not – and thus it might threaten their balance sheet. This leads to booms… and busts.

This has been the state of affairs ever since this practice was formed, but became worse when the world left the Gold Standard, and the U.S. finally severed the last remaining link to Gold on August 15th 1971, when Richard Milhous Nixon, closed the Gold Window.

Almost three years later Louise Auchincloss Boyer, fell from her 10th story window, just days after a story that she was alleged was to be the source of, that “All the Gold in Fort Knox has gone.” Her death was judged suicide… (Link: You can read the full story – Here )

Britain’s debt is even worse than I feared.

Late on Saturday night, I was researching Britain’s National Debt, and to my surprise and horror, I found it was even worse, than I suspected.

Anyone who has a mortgage, or variable rate loan, ought to be on pins and needles, as interest rates are set to rise, for a number of reasons.

Deutsche Bank’s chief economist David Folkerts-Landau just released a scathing report, aptly titled: “The ECB Must Change,” in which he calls the ECB out from a banker’s perspective, which is now eerily similar to a layman’s.

“After seven years of ever-looser monetary policy there is increasing evidence that following the current dogma, broad-based quantitative easing and negative interest rates, risks the long-term stability of the eurozone…

…Already it is clear that lower and lower interest rates and ever larger purchases are confronting the law of decreasing returns…. but the ECB’s response is to push policy to further extremes. This causes mis-allocations in the real economy that become increasingly hard to reverse without even greater pain. Savers lose, while stock and apartment owners rejoice…

Thereby ECB policy is threatening the European project as a whole for the sake of short-term financial stability…. The longer policy prevents the necessary catharsis, the more it contributes to the growth of populist or extremist politics…

A returning to market-based pricing of sovereign risk will incentivize governments to begin growth-friendly reforms and to tackle fiscal stability. Flagging the move should dampen adverse reactions in financial markets.

We believe that normalising rates would be seen as a positive signal by consumers and corporate investors. The longer the ECB persists with unconventional monetary policy, the greater the damage to the European project will be.”

Japanese Rate Rises?

And even in Japan, interest rate rises are being discussed:

Bank of Japan policy board member Takehiro Sato went public in a speech to business leaders two weeks ago. Here are some key quotes showing what amounts to complete opposition to the Bank of Japan’s current course:

“When there is a negative spread, shrinking the balance sheet, rather than expanding it, would be a reasonable business decision… leading to restraining loans to borrowers with potentially high credit costs and raising interest rates on loans to firms with poor access to finance.”

As for those borrowers, think SMEs, entrepreneurs, everyone from the middle-class down, and virtually everyone but the corporate interests that have succeeded in regulatory capture worldwide.

“A weakening of the financial intermediary functioning could affect the financial system’s resilience against shocks in times of stress.”

He also said:

“There is also the risk that financial institutions that have problems in terms of profitability or fiscal soundness will make loans and investment without adequate risk valuation… I detect a vulnerability similar to that seen before the so-called VaR (Value at Risk) shock in 2003.”

Taken together, Mr. Sato is essentially saying that negative rates are stunting the chances of economic growth, removing any chance to soften the blow when it comes, and is setting us all up for wealth destruction across the board, giving policy makers no capability to react if a downturn begins.

Japanese politicians seem to be taking the ball and running with it. A key policy chief of the opposition party is now calling for Prime Minister Abe and the BoJ to begin raising rates.

In particular, the new platform cites how these policies hurt savers, along with its failure to boost inflation, wages, and has a negative crash in trade balances.

And in America too, are Interest Rates set to rise?

Gerardo Del Real, the Outsider Club’s newest expert, is spot on on how this will pan out for the U.S. . Just last week, he had this to say, which bears repeating:

“So what to do? Understand that the big money, the portfolio managers, pension funds, and insurers cannot continue to invest exclusively in negative-yielding assets.

Understand that a trickle of the trillions they manage will work its way to the U.S. markets, the dollar, and gold. Not because they’re gold-bugs, but because they will have no choice.

Understand that of those three options — the U.S. stock market, the dollar, and gold — gold is the smallest market and therefore the most susceptible to the largest moves.

Within the gold market, the junior resource market — especially the junior gold companies — has been absolutely decimated, and provides the best risk-reward proposition.” (See my last post – Apocalypse Now)

Few people are more reviled by everyday people than bankers, and rightfully so.

They hide usury in the fine print and send Court Sherriffs to evict you from your home in their stead.

They distort and manipulate markets for their own gains, from LIBOR, to the gold fix, to silver prices, to exchange rates, and on and on.

Then, with the corruption of a wink and a nod, they use regulatory capture to remove all risk and collect cushy bailouts while manufacturing and commercial jobs disappear, wages shrink, and with it the tax base as neighborhoods fall into squalor.

Throughout the 80s, the North of England – Northumberland, Merseyside, Greater Manchester, South Wales were all hit hard as deep mined coal pits closed, and the industries that had grown up with them, went with them.

A piece written just over 100 years ago, after a Banking Panic in the U.S., brought about largely by the tactics of the Banks, and which surprisingly, our recent “Credit Crunch” appeared to be a mere replication writ large goes as below.

The writer, George Howard Earle, Jr. of the Real Estate Trust Company, in 1908 wrote:

A Central Bank as a Menace to Liberty

The solution of the problem of a central bank, with power to control the currency of the United States, to be at all adequate, must depend upon and be controlled by ultimate political principles.

The same principle that underlies the never-ending conflict between the advocates of a strong centralized government and what are called “states rights,” governs this question.

Taught in the school of experience and adversity, the early English and American patriots learned the salutary lesson that the development of peoples, as well as their happiness, depended more upon liberty – that is, the power to control and govern themselves, rather than to be controlled or governed by anybody else – than upon any other single thing; and they, therefore, in drafting our Constitution, always viewed government as an evil made necessary by the weakness and defects of human nature, and never extended it beyond that necessity.

Under the plan of freedom, of self-reliance, self-dependence, self-government, we have become the greatest, the happiest, the most powerful people of the world; but notwithstanding these proofs to justify the work of the Fathers, we have more and more concluded that we could have done a great deal better.

We are rapidly tending in the opposite direction, which must 506 inevitably destroy liberty by vesting all discretion in some form of central government, rather than in the people as individual, independent entities.

Starting with the theory that government but existed because of the defects of mankind, and was but an evil wherever it exceeded the necessity of restraining evil human tendencies, we have now reached the higher light wherein we produce schemes of regulating everything, until liberty is but a name, and we govern ourselves by theories entirely independent of the characteristics of the people to whom our systems are to apply.

It is difficult to find any one, nowadays, who has not some “counsel of perfection,” and founded on it, some theory of government that would work perfectly with a perfect race, in whom neither self-interest nor passion existed and that, consequently, did not need any government at all.

The same could be said of any central authority, whether in Britain, or further across Europe.

All control passed to others, means they will meddle. And in meddling, they will postpone the inevitable, but each time they postpone, the crisis merely gets bigger, and more unstable. Eventually, there is no-one big enough to stop it.

We will shortly find out, if this will be in the next credit crisis. Those who have salted away bit-coins, gold and silver, will fare best. Those who have borowed to feed their insatiable habit to spend, will not surprisingly, not do well.

Money, real money (Gold and Silver) takes time to make, is hewed from the ground at great expense, and whilst its value varies with the day, the month and the year, it’s value never disappears totally and increases over time – even if in fits and starts..

Credit created out of a Banker’s pen, printing plates, or these days computer, can disappear in a cloud of smoke. Over 200 currencies have disappeared since the dawn of the printing press, and fractional reserve lending, but Gold and Silver are still an ounce of Gold, and a Pound of Sterling Silver, from which Britain’s derived its name, and now our currency takes its name.

Central Bankers, therefore are more the problem, than the cure.

Here, Daniel Hannan – discusses the implications for the future with Emma Reynolds who puts forward the case to remain.. Daniel Hannan puts forward his reasons for wishing to leave.

A vote to Remain is a vote for…
Big Government
BIG Corporations
BIG Banks
and BIG BROTHER.

Britain, grew into the world’s superpower, in the 1800s, and now leader of the 64 nation Commonwealth, by extolling those things that we Brits hold dear. The law grew up from natural laws – “Common Law”, where people devised the behaviours they supported, and those they despised. Law was a higher source of guidance in man’s affairs, and it wasn’t handed down from  “on high” – i.e. from those holding the reins of power – as has been the case in most of the world – and particular the Eurasian legal systems – Roman Law, Napoleonic Law, or Regal Law.

This piece lays out the historical context.

Apocalypse Now?

Posted on Updated on

GlobaDebtlPyramid

The image above shows how all the wealth of the world, is really built on an inverted pyramid of real wealth. That means, all those products above the green zone, are not real wealth, but paper claims on wealth. When the next financial crisis occurs, the value of all those products, will equal the value of those in the green-zone. They’re all derivatives – which means either the derivatives lose their value, the Gold and Silver raises its value, or some combination of the two.

Our figure heads, whether of Royal Blood, Presidential or Prime Ministerial appointees, have a large coterie of advisers, and those who pull the strings and influence events, behind the scenes.

Since, I began studying Markets, Politics, and Economics, in my student days in the 1980s, there has been a growing awareness of the Deep State. And those bankers who are part of it, manipulate the currency for their own ends. LIBOR, EURIBOR, COMEX prices and even asset values.

See: Banking Puppet-Masters

The power behind the throne, goes back far longer though, than most people recognise, and this group of people dictate the way that democracy, and politics is carried out from behind the curtain, particularly in the U.S. and the British upper class, who before them, were essentially the experts at this behind the door control.

During the early days of Banking, many of these Banking families – Rothschild, Morgan, Chase, Barclays, Seif, Warburg, Baring, and others, provided the finance, that allowed (or denied) what those figure heads could do.

In the days of the Royal Households of Europe, this essentially meant the ability to raise finance to fund an army, and wage war. For the financiers, it often meant funding both sides, and backing both horses in a two horse race.

It was usually a winning proposition for the bankers, whoever won the war. The debt remained, due to capitalism’s basic principle – “The Law of Contract” – even if the basic tenets of contracts have been watered down over many years, to allow people (mostly women) to change their minds… as on-line retailers are currently finding to their cost.

Baron Rothschild, famously got wind of Wellington’s win at Waterloo in 1815, ahead of the rest of the City of London, and sold off his holdings. Only for those who saw him, to react in his wake and follow suit. Rothschild then went on a wild buying spree, buying up assets for essentially “pennies on the dollar” as the Americans might say. When the dust settled, a huge transfer of wealth had occured from those shareholders who sold to the Baron and his family.

And so the model that bankers follow has remained to this day. Bankers know more about the inner financial position of their clients, than any other group of individuals. They wouldn’t use that knowledge to strike, when the iron is hot… Would they?

Banks loan out currency driving up property and corporate asset prices to unsustainable levels, only for the the currency supply to tighten, and thus cause a crisis, so that assets get sold off on the cheap. In the most recent example, we saw house prices rising inexorably, as Banks increasingly lent to those who might be considered high risk – the “sub-prime” market many have heard of. They then took advantage as the dead hand of property – mortgage holders took advantage as buyers defaulted on their mortgage payments, and the banks got thousands of homes on the cheap. Hank Paulson, allegedly made $5 billion in the sub-prime mortgage debt bomb. In a world without fiat currency, interest rates would adjust according to monetary demand, and cool things, or only allow those projects with highest return to be funded.

As an example, in the last crisis, bankers loaned to businesses such as Neil Mitchell, who bought a hotel, using finance and set about redeveloping it. In the final weeks before opening, his Bank, HSBC, used their restructure arm – and removed his financial support, causing his business to fail before it had even begun trading. They took the mortgaged asset (his hotel), completed the minor works still left to do, and now run a Hotel making them an income from all Mr Mitchell’s hard work. Imagine how frustrating it is for him, and all the other business owners like him who don’t have access to the information, that the Banks have, and withold from their sheep, waiting to be sheared in the next financial crisis.

During the final stages of the previous supercycle of commodities, that lasted from the mid 1960s to the early 1980s (about 18years) prices of most commodities rose manyfold. and in the Banking Sector, quite a few mid-size Banks folded in the 1973 Banking crisis. Then the UK. FT-30 stock market famously fell 83% reaching 156 and the UK government felt obliged to prop up failing industries and nationalised many of them – British Steel, British Airways, British Leyland, to name but a few.

Since the early 1980s, the thinking has changed – failed businesses should be sold off to their stronger competitors, as the Banks and other financial institutions – AIG, Fannie Mae, Freddie-Mac, Bear-Stearns, Lehman Bros, Lloyds, TSB, RBS, Northern Rock, and others were. (Though recent news regarding Bear-Stearns may concern many of its former investors.)

I’ve been thinking something similar to the 1970s will happen again, ever since I began studying this commodities super-cycle at the start of the millennium…Back then, Gold, and Silver went up just as it did in the 70s. Inflation took off in the late 60s, and early 70s, rising almost 8-fold for Gold, before pulling back by almost half.

Over the next 4-5 years (1974-79), prices fell first by close-to 50%, and then from 76 onwards, began rising, shallowly at first, but with increasing momentum, rising 8-fold again from the mid-cycle lows to peak at $850/oz in 1981 for Gold, and close to $50 for silver..

That, by my reckoning, if repeated, would take us to circa $8,500 for Gold, and $500 for silver by 2018/19 or in the years either side of these..

I put that forecast into print (on-line of course) as long ago as 2005. But as Jim Rickards and James Dale Davidson state, the next FOMC meeting on June 16th, will be critical. If they raise rates, this will suggest that the economy is healthy (Ha!) If not, we may see a major sell-off in the markets, preparation for QE4.. and that will probably send Gold (and Silver) eventually skywards…

Jim Rickards has even gone on record as suggesting a price for Gold of almost $14,500 for Gold. Wherever it goes, the price will be multiples of where it is now.

And this image below – compares the cycles from 68-76, with the period from 2000 – 2014. Anyone cannot fail to notice the similarities, merely the length of time is different.

Gold Price - 1968-2014

It has often been said, that history repeats itself, and many say that it doesn’t repeat, but it rhymes. The difference is, this time it really IS different… In the 1970s the super-cycle was essentially limited to Europe and the English speaking peoples – North America, Australasia, Southern Africa, and the suppliers of those commodities in Africa, who borrowed heavily as commodities rose, and then had control of those assets sold when commodity prices inevitably fell in the early 1980s causing national solvency crises in those indebted countries…This time the whole world, with 2.5 billion Asians and another several hundred million South Americans will be involved.

IF, or rather WHEN, the global meltdown begins, the governments and their Central Bankers, will have two options…

1. Do nothing (Unlikely)
2. Intervene with more monetary stimulus.

It is my view (and that of many others) that they will intervene.

What might trigger the Global Collapse?

As I’ve said before, a decision by Saudi-Arabia to sell oil in a currency other than dollars will bring an end to the agreement put in place in 1975, which propped up the dollar, and made it King Dollar.

The decision by the KSA, might (almost certainly, would) incur the wrath of the US of A, so along with an agreement to sell in an alternative currency, would also need some other nation’s military to back it up… China? Perhaps, but unlikely – at least not yet. Iraq’s leader Saddam Hussein, and Libya’s leader Colonel Muammar el-Qaddaffi, both attempted to sell oil in currencies other than dollars, and the outcome is there for all to see. A similar situation might prevail in the Saudi peninsula, which could trigger a spike in oil prices if major oil facilities were involved, and this would disrupt world markets and possibly trigger the meltdown.

Another potential trigger is a major nation defaulting on a payment to the Central Banks and the bond holders – such as triggered the Cyprus banking collapse, and the next domino Greece which put the PIIGS in jeopardy as the Banking crisis unfolded…

Another potential trigger is a major bank becoming insolvent. This could be caused because a business or country, with bank support, and perhaps large outstanding loans, fails, causing a major loss, over and above the banks ability to absorb those losses, causing a cascade.

It might be a major loss on a trade by a trader (similar to the London Whale) which affected JPM-Chase costing it $6.2billion in 2012, or as was directly the cause of the Barings Bank failure in February 1995, when Nick Leeson lost £827 million (circa $1.19 Billion at current exchange rates) a Bank that had held the English Monarch’s finances since King George V.

However, less well known according to Wikipedia, is the allegation that Barings Bank’s near insolvency in November 1890, as a result of a debt crisis in Argentina, caused the credit crisis of the early 1890’s and quoted from a book by John T. Flynn – written in 1932 “The preceding year [in 1890] the great Baring failure had shaken London and the rest of the financial world. America was shielded from its most virulent effects because of a bountiful wheat crop. But the following year all the forces of business disturbance were assembling, though the country as a whole hardly realized it. Gold was leaving the country at an alarming rate.”

As usual, when the financial world faces a crisis, Gold [and silver] is the safe haven of choice of large swathes of the investing world. And this sudden interest, drives prices higher… often much higher.

Barings also stands accused of supporting the south in the American civil war, and the Louisiana purchase, plus supporting France in the Napoleonic wars. As I have said, Banks will support whatever is in their interest, whether that is good for the rest of us – or not.

A solution going begging?

In my last post, I referred to a producing junior Gold miner, quoted right here in the UK. A company, I have been following for some 12 years. A company that has seen many twists and turns as management changes, and investments in different countries and ore bodies has impacted the scale and ownership of this company’s assets. But Geopolitics has also been a major factor. However, with the only mine, smelter and refinery of its type in the whole of sub-Saharan Africa, which to build such a facility from scratch, would run to $500-750 million.

The company has land holdings in 5 countries – with 2 producing mines. Not all of which are wholly owned, but like in many jurisdictions, jointly owned to a greater or lesser degree with state governments.

The producing Gold mine, comprises a shallow underground operation, currently mining at a depth of circa 200m and processing ore through a single facility utilising a combination of crushing, conventional sag milling, combined gravity and CIL process, electro-winning and bullion smelting.

A recent fund raising, to allow phased refurbishment of plant ran in two phases: the re-capitalisation of the mining fleet and refurbishment of one of the two mills, brought the mine back into production targeting a production rate of 2,500 oz of Gold per month (about 30,000 oz per annum). This was exceeded with Gold production re-commencing in October 2009, and the production for the financial year to end of the Financial year 2014 was almost 59,000 oz of gold, down slightly, from the previous year. Figures for 2015 are due in several weeks, and thus will give us an indicator of current affairs and cost structure.

The second phase of the programme included, refurbishment of the second mill and expansion of the leach circuit. In June 2011, the Company announced that the Phase 2 construction programme was completed with Mill 2 being successfully commissioned on time and within budget. Further, in March 2014 a pilot plant to recover gold from 13Mt of tailings was commissioned.

In its current mines, it holds reserves and resources totalling in excess of 3million ounces, in 2 countries, with controlled costs, and evidence of more potential in several of its holdings.

A recent management change has also reduced costs, such that all-in costs (C3) are now almost at break-even (@ circa $1250/ozt) Though of course, Gold’s NY price rose, earlier in the year, breaching $1300 before Janet Yellen’s dovish speech suggested that a rate hike was on the cards, and the markets saw this as an opportunity to buy the dollar. This strengthened the dollar on international currency markets, and Gold fell back as a result. Currently close to $1210/ozt (02-Jun-16). But, if the expected rate hike doesn’t materialise, it will also be taken by the markets as economic weakness, and a sign that more QE may be required. That may cause a sell-off in the dollar, and will send Gold up again.
Few opportunities exist in life to make huge sums of money, but this is one such time.

If you want to know more about this junior miner, and its prospects then respond in the comments box below, supplying your e-mail, and I will supply a fuller picture, details in reply.

The Road To Serfdom?

Posted on

0311_china-gold-hording_416x416
China’s Gold Hoard – is bigger than they claim – MUCH bigger.

In the last 12months, the World economy, has taken a distinct turn for the worse…Starting last summer, the Federal Reserve announced it would begin normalising interest rates. (read: raising them, by baby steps)

They intimated in FOMC minutes, last year that they expected to increase rates by 4 times in the next twelve months. As it is, some nine months later, they have managed to raise by just 0.25% and they now feel that they will manage only 2 increments by year end.

As the Fed Funds rate was raised by 25 points last year, the DJIA fell from its new all time high at almost 18,300 in early May 2015 to 15,670 in August 2015, and early February this year, before bouncing higher on interest rate movement

However, several commentators – Doug Casey, Jim Rickards, Bill Bonner, James Dale Davidson and others have commented that many large corporations are actually borrowing money at low interest rates to buy back their own shares, to maintain the illusion of prosperity, by reducing the number of shares in issue, which increases the value of those shares that remain.

The FT100 which peaked at just over 7,100, for only the second time since 2000, in 2015, has generally bounced around in a downward direction, reaching 5,500 in February this year, before some of the Brexit talk began in earnest, in recent weeks, and bouncing up to 6,400 mark in April. However, recent Brexit fears have again driven markets down towards 6,250 (6,262.85 as I write), and the trend appears down.

Indices around the world rose yesterday, except in Turkey, Argentina, China and Colombia where they continued their downward slide. Several Economies in the Americas – notably Brazil and Venezuela, are experiencing rising inflation. Indeed, a Sky News report, quoting the IMF suggested inflation in Venezuela, could rise to 4,500% over the next 3 years, unless something is done to change things.

Socialism, is once again being proven to be a failure. This has echoes of the 1970s, when Britain too faced its own crisis. And America too seems to be heading down this road.

See this:

A Letter to America… Don’t follow the European model… Daniel Hannan – MEP.
(A warning also to Remainians?)

In Venezuela, as Britain then, they have huge reserves of oil, but as new exploration, and fracking – particularly in American states, raised production, their levels last seen 30-40 years ago, at around 9-10 million bopd.

Prices went from $121 bbl to $28, over the winter period, but as the traditional summer driving season begins in America, coupled with rising vehicle numbers in India and China, and some slacking off of production, as several American oil producers have succumbed to the lower prices, oil has bounced back to the $48/barrel mark, and should remain in this $50-70 region for the foreseeable, unless, some of those new producers collapse even at these prices, and demand remains firm.

Both Brazil’s and Venezuela’s oil industries have suffered partly to corruption issues, but also there appears to be some involvement by America’s dark state, at least according to Nomi Prinz, ex Goldman-Sachs employee, and now author of several books as she appeared with Max Keiser, on the Keiser Reporton Tuesday.

All it will take is one large domino to fall in the next few weeks, and the prediction by James Dale Davidson (See Pic) will no doubt come to fruition.

EconomicPrediction-May-24th-2016

The IMF appears to be very concerned about world events spinning out of control, as the chief plate spinner extraordinaire – Madame Lagarde – appears to be struggling to keep all the world’s plates from crashing. She will undoubtedly have to run to keep all these increasingly unstable plates on the top of their poles.

Talk in the markets has also begun discussing QE4… Is this likely, as Gold has stumbled at the $1300 level, and pulled back? From a trading perspective, the Gold (AU) RSI (Relative Strength Index) hit 70, which suggests a temporary over-bought status, but this pull back will prove ephemeral too – perhaps lasting until the end of summer.

As George Soros, Hank Paulson, China, India, and many American Billionaires wiith their finger on the pulse, sense the mode shift, and begin buyng Gold again, while mainstream buyers sit on the sidelines – for now. However, the World Gold Council reported the strongest first quarter on record for Global Gold Demand. And the COMEX ratio of owners to ounces hits an new all time high – 500:1, meaning only the first person in 500 will get physical possession of their physical ounces, if they demand delivery. The rest will go begging.

When the general public gets involved, in this new gold bull, this will translate into direct increases to the bottom line for Gold miners, and the sector that gains most on such moves are the juniors. One such junior producer in Africa, has already experienced an almost 100% improvement over the last 5months from its extreme lows.

Although four nations already have taken steps down the road of Negative Interest Rates (NIRP) – Japan, Switzerland, Sweden and Denmark, with the U.S. also now considering this, if this happens, the rush to Gold (And by association – silver) will ensue, and the rise I predicted some years previously to happen in the 2018-19 period will come true..

I will be discussing the above miner in more detail in a future post.

But Jim Rickards latest prediction for the Gold price is over $14,400 per ounce.( See below)

EconomicPrediction-May-25th-2016

I think he may be slightly over pessimistic, but not by much.

And all other commodities will rise in similar fashion. If you haven’t got Gold, then your Dollars, Pounds, Yen or Yuan, or whatever currency you use, will be worth concomitantly less. and even a median income will feel like serfdom.

Time to put circa 20% of your wealth into precious metals. (in my humble opinion.)

But here Daniel Hannan, explains how the English speaking peoples made the world. (Even if some of them, are out to steal it from us)

 

Until next time.