‘J’ Curve Conundrum.

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Thomas Malthus, was a Reverend at the dawn of the Industrial Revolution in England. In 1798, he wrote an essay, “Essay on the Principle of Population”, which was concerned with the rising population, and theorised that improvements in subsistence would lead to higher growth in population, which in turn would mean competition for resources, wars etc, which would lower standards of living back to subsistence level.

Of course back then he couldn’t have envisioned the dramatic changes in technology, and the inventiveness of we humans, nor of the advances in food production, and at how much land has been turned over to agricultural use.

We see examples of this in countries where historically the people had large areas of un-developed land: For example, in areas such as Argentina, which has large tracts of savannah – open grassland – and Brazil which has huge jungle and forest areas.

This led Argentina to grow Beef cattle, which was ideally suited to their environment and during the early 1900s, Argentina was one of the richest six or so countries on the planet.

In the last few decades, we have seen how forests and jungles have been cleared in increasing proportions, particularly in Papua New-Guinea, and Brazil with their rising populations, and need for more cultivated land, but also the loss of habitat for native species, and a rapid fall-off in biological diversity. Brazil of course became famous for its coffee crop, and more recently sugar cane, which it uses ( after processing into ethanol, ) in its efforts to minimize its oil costs by using it in its Taxi fleets, and other vehicles.

But was Malthus that far wrong? Back when Thomas Malthus was alive, there were just one billion people. By 1927, there were 2 billion. In 1960, that became 3 billion, and by 1974,  4 billion.  As of 1987, the population of the planet was about 5 billion inhabitants, and by 1999, that was 6 billion, in 2010, we passed the 7 billion mark, and those who make these predictions think we will surpass 9 billion by 2030-35, which means at current rates, we are adding 1 billion every 10-12 years on average.

With China announcing it will amend its one child policy so that those people who satisfy certain conditions, may have another child – this may drive growth faster. However, cultural norms which favour boys over girls, is precisely the policy which may lead to more men who do not have a partner when they reach sexual maturity, and this we know leads to higher sex crimes. But may also add to instability, and a political drive to find use for these men in the military.

But  if this means more unemployment, and higher demand for food at a time of maximum worldwide output, is this a recipe for wars over resources? And as China increases its economic muscle, so  it will increase its military muscle, and already there are rising tensions in the South-China seas, as Vietnam, Indonesia, Japan, and Philippines have rising demand for energy, and other resources which may be buried beneath this contested stretch of water, at a time that Chinese Naval vessels are patrolling and harrassing other ships in the area. Vietnam even mentioned its concerns in a broadcast on Vietnam’s Overseas broadcasts, which it is known that America monitors. Was this an open request for America to intervene?

Of course, back when Reverend Malthus was postulating, he studied rabbits, and of course mixamotosis cured that particular problem for decades when it first appeared in the 1900s. By the same token, wars such as WW1, and WW2 reduced the numbers of humans at a time of rising populations and lower economic activity, and have no doubt lowered the total populations that we see today. So, is therefore ,WW 3.0 almost inevitable?

If we study almost all “bubbles” from the South-Sea bubble of the 1780s, to the Dot-Com mania of the late 90s and early noughties, we realise that – as the old saying goes – “What goes up, must come down”.  Does this apply therefore to populations?  And if not, how do we cope with 10 billion plus people on the planet by 2050, given that the amount of land is finite, oil, gas, and other mineral resources particularly, take increasing amounts of energy and finance to find, but the biggest hurdles will be potable water, and food.

The unrest in the middle-east will be as nought if we do not as a species collectively address these hurdles. Many African countries have shared the vast river resources of the Blue and White Nile rivers, but what if one country through which the rivers pass takes more and more water for agriculture, and thus leaves less for those countries downstream?

In 2008, food riots broke out in 40 countries.  Aquifers are currently being depleted at phenomenol rates, and many will be empty by 2025. What is less well known is that these take 6,000 years to fill, and it takes 1,000 tonnes of water, to grow 1 tonne of Wheat.

And just since the year 2000, water demand has surged 58% worldwide.

So, everything is about to get VERY expensive

Precious Metals too suffer from this, and one of the few ways to protect yourself from what is to come, will be to hoard those resources that do not diminish over time. – Which brings us back to money – Not currency – A piece of paper, is a piece of paper, even if it does have $100 printed on it.  JP Morgan used to say “Gold is money, everything else is credit”, but Gold or Silver are also things of beauty, and when times are tough as we may be heading for, then possession is nine-tenths of the law, and the value of that money will  be preserved during inflationary times. Silver too, is a fungicide, a bactericide, and virucide. Kings and Queens, would in years past only drink from Silver vessels – a way to make potable water?

As Central Banks and particularly the Fed, manipulate the precious metals markets, we see Art prices rising inexorably – just as happened in the mid 1970s. Those seeking a return on their capital or who wish to move their capital to an overseas market to limit their tax position, may pay for an art-work, and ship it overseas where some years later they sell at a profit, and pay less in taxes.

Pop art icon, Andy Warhol, had a piece recently sold at auction, at over $100million. The Art market is telling us a subtle truth – the dollar is losing purchasing power, relative to things – Art in particular. The time will come for precious metals too.

Speaking of which, I’ve been reading more bullish sentiment of late regarding Silver Prices…

A couple of PM specialists feel that the bottom has already been and gone, and that we might see a new yearly high this year, and an all time high next year.

Having commented already on where I think Gold will go elsewhere, I suspect (But hope I’m wrong) that silver will remain in the doldrums for another 2 years or so, before we see a new all time high.

As things stand, Silver prices are not just based on investment demand. Supply is variable based on other commodity production – it is a by-product of several other mineral production… Zinc/Lead/Nickel/Copper/Gold mining in many mines, which with increases in growth in other markets will stimulate production of these other commodities (and thus silver).

As the price at the moment is still just above where mines can be profitable, then there’s not much reason to cut back production. (New mines are a different matter)

That said, there’s lots of new technology, which should keep demand up – with 10,000 uses, and the most widely used substance after oil – and if investors still keep buying silver coins and rounds/bars at unprecedented levels, at these low low prices, then once prices start to turn up, this will suck in the wider investment community, and we will see the blow off phase. (the J curve where the price goes vertical)

Of course, when that happens, that might be the end of the Dollar, though the U.S.’s rising oil production may overturn that as fewer dollars head overseas to pay for oil, and thus as some of those dollars return home for software, and other high-tech products, then this may strengthen the currency.

That said, hopefully, we’re at the turning point for precious metals. Anyone interested in buying Silver at V.A.T. free prices might want to learn where and how they can do this – Here

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    […] to the “Hockey Stick”, moment,  of which I have mentioned in one of my earlier posts (the J Curve). Salinas Price, then talked about the revaluation of Gold to some figure, which various […]

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