An important anniversary slipped quietly by last month without any fanfare, on August 15th, as the anniversary of the day, that President Richard M Nixon, closed the Gold Window, and put the world on the path to financial armageddon.
From that day to this, the U.S. has essentially been able to print up as many dollars as it felt it needed to pay for things it wanted, and forced the rest of the world to accept “funny money” – aka. – Fiat Currency.
The fact that they were able to strengthen the dollar in 1973, temporarily when it convinced Saudi-Arabian leadership to accept an offer it could hardly refuse is still highly relevant…
America would back the House of Saud, with the full military might of its national forces, and the Kingdom of Saudi-Arabia (KSA), would accept only U.S. dollars for its oil, forcing dozens of other countries to trade for dollars, to pay for that oil, and the KSA, would re-invest those surplus dollars in Treasury Bills. Eventually the rest of OPEC would be forced to follow suit or commit commercial suicide.
Over the last 9 months, events in the precious metals markets and geo-political and economic circles, world-wide have been making headlines.
As geo-political tensions rise around the world, I wonder out aloud what is the end game. To learn where we are going, it’s important to know where we’ve been, and we have to look back 40+ years.
If we look at the ageing baby-boomers who are retiring in droves here in the west, (Of which I am one) and as our spending patterns change, we need to understand why this has such a big impact on economies.
In my experience, young people spend their money on a handful of things – Music, Fashion, Booze, travel and generally having fun, primarily in their pursuit of their partner in life – irrespective of their sexual proclivities.
As these people mature, they buy a bike/car, and their first flat or small starter home, and all the essentials of normal urban life – beds, tables, chairs, sofas, kitchen gadgets etc.
Then as they pair and begin to settle down, their partner now safely esconced in their home, perhaps 5 years have passed, and two incomes in one household means for a while they can experience a rise in social status and maybe buy a bigger home or have more expensive holidays. (though things are a little different in recent years as gap year students take the young to the far-flung corners of the globe.)
With women now making up more than half the working population in the west, women are now leaving “bonding” later, and perhaps seeking someone who meets and exceeds their expectations, and thus probably for professional women (i.e. those with degrees and/or professional qualifications) they’re leaving the having of children until they are in their early 30s, or as late as early 40s causing problems for over-stretched maternity departments, and over-stretched National Health Services, as increased age introduces greater risks and higher costs.
By their mid-thirties, people are climbing the corporate ladder, getting increases in pay, generally as their productivity rises in line with their experience.
Output on a national scale rises but this is only temporary unless higher investment in capital goods (new vehicles/machinery etc., that gets goods to market quicker, and/or cheaper) increases productivity further, these gains are not carried through indefinitely though. This is where political mistakes are made, as politicians think that the growth will continue.
As people hit their forties and early fifties, their willingness to learn unless pushed, seems diminished as they become experts in their field, just at the time newer technologies are adopted by the young first.
By the time people hit their mid 50s and early 60s, their abilities are beginning to decline; health issues begin to rise on average and national governments see a fall off in taxes, as some retire early, or die young – though the demands on their national budgets increase as improvements in health-care put additional burdens on national budgets.
Intermittent overseas wars also add to these burdens as those apparently with historical empires adopt the role of world policemen.
This adds further financial burdens on countries, and leads to overspending to maintain prestige, or to appease emotional electorates, or to maintain their leadership role, allowing those with more quiescent military to improve and begin spending in increasing amounts.
This was the nature of things in the west when Britain began losing its pre-eminence, and the U.S. took up the political and economic cudgels.
As a result, we now see the extent to which Britain, and America have over-spent in recent years, as the U.S. deficit grows to 105% of national income, and its budgets become overstretched as its military tentacles have extended now to over 145 countries.
The role of World policeman is an onerous one, and like all great empires this eventually causes a collapse at home, due to excessive spending as tribute (the term used by the Romans to refer to taxes) begins to lessen.
As demographics affects all economies, those with rising populations have greatest demand for housing, food, water and the other essentials of life, and when economics fails to meet those requirements, people look for scapegoats. Those with the most usually get the most scrutiny and criticism.
But to get back to the title of this piece, where will this ultimately lead us?
As Vladimir Putin, and Xi Jinping, grow their economies, and grow increasingly wary of U.S. dollar hegemony their actions have consequences for all of us.
China has in recent years agreed bi-lateral trade deals with a rising number of countries to reduce the dollar from its trading, and China in particular has used its excess dollar reserves to buy increasing amounts of Gold and Silver, and overseas resource assets with precious metals and other precious resources for its industries.
Russia too has sought to lessen its dependence on dollars, and the BRICS Development Bank recently announced, will wean these emerging economies off the dollar as the $100billion in Capital gets used to help out economies in difficulties. Will some of this capital be used to buy Precious Metals? It would appear so, as China now trades more Silver in physical metal form, than the COMEX, the former leader in precious metals derivatives trading.
This will ultimately lead to a dollar collapse, and like a wounded animal, this may lead to the U.S. lashing out to protect its interests, as it has been in the middle-east and in Ukraine, where fights to protect access to middle-eastern oil, paid for with dollars, and for access to Ukrainian agricultural land are being waged by proxy military. But the collapse of the dollar unless mitigated by the increasing energy production, may cause the whole world economic woes, or worse.
This involvement in the middle-east has caused many of the problems as those with a different view of the world seek to eliminate western ideologies from their countries. These skirmishes though, may grow to encompass those other major economies – China and Russia.
James Dines, the economic mind behind the Dines Letter and Dr Paul Craig Roberts former adviser to Ronald Reagan, also thinks that we are on the verge of a major conflagration and James Rickards a CIA adviser on financial matters, in a recent interview claims the U.S. is staring down the barrel of an economic gun.
But also in January 2014, the United States government entered into a deferred prosecution agreement with JPMorgan Chase which is the biggest bank in the United States and one of if not THE biggest banks in the world giving those who have benefitted most from the financial mess the U.S. has gotten itself into essentially a free pass.
The recent prosecutions of Financial Institutions has resulted in fines being paid, and JPM – probably the biggest offender, has paid approximately $29 billion in fines – yet not one senior banker has done any jail time.
When Janet Yellen begins the next round of Quantitative Easing (which might be called something else) all hell will break loose in the precious metals markets.
Buying Silver… Why NOW?
The reasons are not so obvious.
Silver is collectively, a monetary metal, an investment vehicle, and an industrial material.
Silver’s role in international finance has been prominent over several millennia, as this shiniest of metals was used in Roman currency, and only when Emperors devalued the money by reducing the silver content of coins, did they suffer the wrath of the people. (See: The Coming Battle – 2013)
Industrially, silver is the most widely used commodity on the planet, reputedly used in 10,000 applications and rising. Second only to oil in importance, but its price has been walked lower for decades, as silver was first taken from its pre-eminent role in both American and Chinese money with its removal from the dollar, to junior partner, to minimalist role, and finally in 1964 to negligible role as U.S. currency removed the last remnants of the metal from American currency.
Is it significant, that just 7 years later, on August 15th 1971, the last vestige of precious metals, was removed from the American financial system?
If the death of President Kennedy, and Louise Auchincloss Boyer are anything to go by, I think so.
But silver’s western denouement, means that the East has been able to accumulate this most precious of precious industrial commodities at prices unlikely to be seen again, after this financial collapse begins in earnest.
Silver historically was bought in ratios circa 16:1, compared to gold. We see evidence of this still all around us – 16 ounces to the pound, in the U.S. – 16 fluid ounces to the Pint and this ratio has varied in recent years as silver’s role in monetary matters has been slowly extracted, but its time will come again – it always does…
And with the current Silver/Gold ratio of circa 65:1 when it does go up, because it currently comes from the earth at circa a 9:1 ratio, then its rise will be meteoric.
And if that wasn’t reason enough to be accumulating…
These links should help you make up your mind…
And this page shows you were you can STILL buy silver coins and bars at VAT free prices, and have them discreetly shipped to your door.
And you can get further news on these matters at:
Forgive my opening title to this piece – particularly if you are French…
No, it is not a reference to the delicacy of your country, nor an Englishman’s tirade against one of my favourite places on earth.
No, it is a reference to a story, I have never proved, but have heard recounted many times.
I am of course referring to the oft quoted story of what happens to a frog if you put it into hot water…
According to legend: If you put a Frog into hot water, it will immediately jump out. BUT, if you put that same frog into a pan of cold water, and gently heat it, it will sit there until it boils itself to death.
So my opening question is one of self examination.
Given the changes in the West in the decades since the 1970’s, for the rights and privileges that we fought so hard for over the previous eight hundred years, are we like the above frog, merely watching now, as some of these hard won rights are eroded?
The right to free speech and movement;
The right to freedom from persecution;
The right to vote;
The right to not be spied upon without due cause;
The right to religious freedom;
The right of “Habeas Corpus” and trial by a jury of our peers;
and more recently,
The right to be treated fairly, in the eyes of the law, irrespective of our religious principles, abilities, age, sex, sexual proclivities, marital status, colour of our skin, or the amount of money we have.
Many of these conditions that we have fought so hard to have put into law, have taken years of lobbying for, and yet the same class distinctions abide, and the same ruling elite still watches and rules over us.
The wealth accumulated by the few gives them privileges that we mere mortals can only dream of.
Take the senior banking elite for example. In recent years the Bankers have been involved in a series of actions that would make us mere mortals go to prison, and yet no senior banking figure has to my knowledge, even spent an hour in a Police station, let alone an interview room or a police cell. And if the allegations against these organisations are proved? They merely pay a fine, which ultimately gets paid by either their shareholders, their customers, or both.
One man Neil Mitchell, knows only too well the actions these Bankers have been involved in, as he was on the receiving end of their largesses and their dubious practices, as they foreclosed on his business just at the moment he was about to become successful. But, I digress.
So can a mere mortal join this elusive elite?
It means you, nay, WE need to accumulate wealth.
And, I’m not talking about a few million. That would be nice, but it wouldn’t put you in the realms of the elite. To reach those heady heights, you need circa £50million, and even that might be on the low side. According to the book “The Coming Battle”, over 100 years ago, the entry to this elusive club was already ten million dollars, and the value of those dollars has fallen 97% in the intervening period, so you can do the mathematics.
It has been said that a man (though it equally applies to a woman) can be judged by the company he (or she) keeps. Which boils down to the people you count in your social circle. In order to join this elusive band of brothers, you need to be useful to them, and that means you need to be an entrepreneur.
The word “entrepreneur” derives from the french word for “middleman” though its literal translation is “between taker”.
But being an entrepreneur is not necessarily just about being a middleman, it is about being a risk-taker. And we will have to think – as Napolean Hill once wrote, to grow rich, but it will be the route out of a future that many do not yet see coming, as the west’s social systems unravel, and future expectations go unmet.
Since the second world war, we baby-boomers constructed a political system where we required our politicians to give us care from cradle to grave. We required that politicians bribe us with our own money to educate us, keep us healthy, regulate traffic, regulate our work and our activites in the guise of “Health and Safety”. We even employed vast beauraucracies in government departments to tell us what to do, and how to do it, police and military systems to control it all, and funded it all on the back of growth we thought would rise almost forever.
But going forward, the transformation that is currently going on in the economic background means that many organisations that we currently see and use every day, will have to undergo major changes, to adapt to this revolution.
It is a truism that we humans have an in-built normalcy bias that makes us believe that the future will be an extension of today; and in the most part it will, as these things change slowly, but occasionally, there come times in economic and social history where change speeds up, and revolutions occur.
The first of those revolutions was the start of the agrarian society, when men began planting crops, and thus the normal way of surviving using the nomadic lifestyle gave way to living in one spot.
Once men began planting crops, they needed to defend them, and those people who threatened to take that away, were likely to get short shrift from the end of a spear, or sword.
As these people further developed, land ownership began, those with the most strength stood to gain the most, and a landed aristocracy grew up, with Kingdoms, and Fiefdoms spreading across the land, and battles for the ownership of these rich fields and water.
The next major revolution was in the 1600’s with the foundations of the enlightenment, and the discovery in the 1660s of chemical elements giving birth to chemistry. The previous elements of Air, Water, Fire and Earth, gave way to Hydrogen, Oxygen, Zinc, Nickel, Phosphorous, and the other chemical elements.
By the early 1700s we knew about 50 of these elements, and we were about to undergo the industrial revolution as these new elements gave us ideas to turn them into Iron, Steel, Steam-Engines, Iron-clad Boats, Steamships and Trains using wood and coal for fuel.
A second phase occurred in the late 1800s, as oil became more widely discovered, and then in 1901 as the oil in Spindletop, Texas oil well doubled the national output, ushering in the era of the motor-car its success encouraging further drillng, and gave the world and the U.S., cheap oil.
Another phase began a few years later when those early engines gave Wilbur and Orville Wright the idea to strap one to some wings, and the era of flight began. With the mass production techniques as used first by Henry Ford, producing vehicles in growing numbers, the world took its next steps of the Industrial Revolution.
The era of the semi-conductor began the next phase of this industrial revolution, as micro-electronics gave us first the huge power hungry mainframes used in government defence departments for decrypting our opponent’s messages, and later gave businesses the tools to automate many of their administrative functions, with the Lyons Electronic Office, mini-computers, and International Business Machines (IBM) becoming a household name.
The third generation of these machines began when Intel produced its 4004 Integrated Central Processing Unit (CPU) used in those early calculators, and desktop computing would emerge just three years later, by then the number of ICs (Integrated Circuits)in a chip, had risen several fold, and Gordon Moore’s Law was proven as his prediction that we would double in computer processing power every 18 months or so became accepted, and Microsoft would begin its journey to industrial behemoth as the Altair computer was developed giving the young Bill Gates, and Paul Allen their first challenge – to produce a computer programming code (Beginners All-purpose Symbolic Instruction Code) BASIC for this machine which still suffered from having no keyboard. By 1980, the home computer gave us in Britain, dozens of start-ups, and Acorn and the BBC computers. The Acorn, Amiga, Amstrad, Apple, BBC, Commodore, Sinclair, Tandy, Digital Research, Sperry and dozens of others pushed the boundaries of these desktop machines bringing computing into the mainstream.
A spin off of the Acorn/BBC partnership, was the small chip design division into a separate company, that designed the Reduced Instruction Set Chips (RISC) processors, that allowed a limited instruction set to be used, and these computer chips were smaller and lower in power consumption than their Intel designed CISC (Complex Instruction Set Chip) competitors.
These Acorn RISC Machines (ARM) processors went into mobile telephony systems, calculators, PDA’s and some of the early computer systems that have long since been consigned to the history books, but like the Guinea Pig, or Hamster was to prove to the Dinosaurs, when the opportunity arose, they took over. By the turn of the millennium, the mobile phone had got more and more functionality, and the Apple Smartphone which now contained these ARM chips turned the humble cell-phone into the ubiquitous smartphone that 5.2 billion handsets later have transformed our lives, giving us TWITTER, FACEBOOK, YAHOO, BAIDU, YANDEX, ALI-BABA, AMAZON, GOOGLE and E-BAY, and dozens of huge software based American Corporations – Oracle, HP, IBM and others are moving their services into the cloud, so that their revenue streams don’t disappear in a puff of smoke.
BUT, the downside is, that now we’re watching the world evolve at its fastest pace since the start of this wonderfully complex industrial revolution and those not part of this new wave will have to shrink and adapt.
The hardware in mobile telephony has allowed Africa to finally catch up with its western counterparts, as people can now communicate over relatively long distances and create havoc for governments of all political persuasions, with handsets that give them access to Social Media, Finance and information, and allow them to make contracts, discuss ideas, and to build systems that enrich their lives, educate their children and provide health care.
But as this increases their wealth, they will be competing for the scarce resources that we all rely on, and this increased wealth will lead to a population explosion at first, before increased costs, better healthcare, and wider involvement of women in the economy brings the birth rate into line with the West…
But these changes will cause pain for the west too, as we now have a billion more consumers with access to mobile computing power, that 50 years ago, only governments could afford.
And the latest development to come out of this rapid technological change are Crypto-Currencies, allowing Africans to trade where no banks exist.
Of course the first of these was Bitcoin, which according to Bloomberg this a.m., MIT undergraduates are to be given $100 in Bitcoins to see where these Technological University students take this new development.
If you haven’t used Bitcoin, or one of the 80 or so others, then the time to get in is NOW, and one of the easiest ways to do that is through Qoinpro, who not only set up an account merely with an e-mail address, but make an initial deposit, followed by daily deposits into your account. And this means that you can buy increasing amounts of the necessary things in life that you need. And as more and more people use these digital currencies, the digits on your bank account move from central computers in a Bank somewhere out there to the digits on your smartphone. And once that happens worldwide, the Banks become almost superfluous to the needs of most humans.
These giants of the industrial age, which began as storage houses for the wealth of the rich who held their wealth in Gold and Silver and evolved into the masters of the universe, will lose some of their power.
Banks will still need their vaulting businesses. Yes, the gold and silver will still need storage, but the bankers will lose control of the currency that has been abused by Bankers for political ends since the dawn of the industrial revolution, and the privileges they have gained as the Banking Wizards were pulling the strings behind the curtain will be a distant memory.
But that will free us all to make choices for our selves that will REALLY make the Frog analogy I opened with a distant memory.
But we have some tough choices to make.
Look at the previous FIVE GREAT AGES of human progress:
The STONE AGE – lasted 3.4 million years.
The BRONZE AGE – 2,500 years
The IRON AGE – 1,500 years
The INDUSTRIAL REVOLUTION – 180 years
The DIGITAL REVOLUTION – 40 years
You’ll see the length of each age shortens as technology advances.
And the INFORMATION REVOLUTION is about to hit us, as handheld super-computers, and Big Data provides us with all the world’s information at our finger tips.
Google can barely keep up with the number of new Web-sites, and page changes; Twitter feeds, Facebook status updates, and the output from Universities and major Laboratory reports.
We’re about to be overwhelmed by an avalanche of new technologies that are taking shape in labs around the world. If your job isn’t in one of these new industries, you will probably lose it, and if it is, you may still need to adapt as your business’ competitors produce new products, that make your industry shrink or fail.
Being financially independent, having multiple sources of income, minimizing your taxes, and saving enough to live for 50 years in retirement, and the time when you can no longer work, will be the most critical decisions you need to make.
Technologies to cure cancer, stop you EVER getting it, cure arthritis, Heart Disease, regenerate new body parts – livers, hearts, kidneys. 3D printers to produce anything you want within hours of having the idea, and automated vehicles are about to change the world as we know it.
No matter what industry you currently work in, you will be affected, your town, or city, and those around you as these changes take place.
Being financially free will be the only way to cope…
Karl Marx encouraged the workers of the world to unite and to take ownership of the businesses – to free themselves from being wage slaves. Becoming a shareholder in these emerging industries will make you an owner, that will empower you, and we’ll do our bit to inform you of those that we think will be the Microsofts, Googles and Apples of tomorrow.
You will need to learn what being an owner really means.
But you will also need a money system, that can’t be corrupted by governments and bankers…
And you can see the discussion here…
As events in Ukraine spiral out of control, it is possible that in the absence of a thawing of relations between Russia and the U.S., over the Ukraine, a new cold war could be about to emerge.
Particularly as the Ukraine, gets its gas from Russia, and currently owes the Russian Gas Giant – Gazprom over $2.2 BILLION in unpaid bills.
However, all this turbulence in eastern Ukraine, with Russian defenders of their cultural identity, that have stormed Local and Regional government offices, will possibly force Putin’s hand to defend these ethnic Russians which could draw in western forces to defend its supported government in the west of Ukraine.
For Ukraine whose currency has depreciated in value by 27%, since the troubles began, this could spell disaster for the country and its people. The gas bought from Russia was purchased at the highly advantageous gas prices that Gazprom gave to former CIS/Soviet states.
As Gazprom increased its prices to above market rates to Ukraine, to reflect the risk of failure to pay, and to recoup lost income, it is obvious that naturally Ukraine would be upset. Wouldn’t anyone if their energy bill went up 300%? And this has implications for Ukrainian industry, already not as well developed or efficient as their western counterparts.
Aleksey Miller – CEO of Gazprom, Russia’s biggest energy supplier, which in different circumstances would be a huge investment opportunity, suggested that Russia should abandon the Dollar and use the Euro for the international sale of GAS.
Even Christine Lagarde, Managing Director of the IMF, weighed in on the subject of Ukraine, by admitting in an interview on 2nd April, that the problems in Ukraine could affect the global economy.
Of course the Soviet state, went through its own internal challenges in the late 80s, as the commodities prices fell. Russian tanks and soldiers were embroiled in Afghanistan, and the Soviets spent more than they earned, the end result was the end of the Soviet Empire.
Are there parallels today for the U.S. empire? I suspect so – only their printing press has saved them. But will Chinese Gold cause the U.S. empire to collapse? We shall see…
As American and other nation’s troops are stationed in the Far East to – as Hilary Clinton put it – pivot Washington to the Far East, which drew the statement from a senior Chinese military figure, that “Chinese containment” was not possible.
As the raw materials of life have become more important, both Russia and China have used different strategies to achieve similar results.
Russia and the Global Metals Supply Chain
Both Russia and China have large land-masses, and the potential for commodities production. Russia is an important commodities giant. and Russian output is critical to the global supply chain for many items.
Russia is a major producer and exporter of oil, natural gas, ores, refined metals and industrial minerals. According to a recent analysis by the British firm Roskill, the extractive, energy and chemical sectors are vital to the Russian economy and accounted for an estimated 80% of Russian export revenues in 2013.
It’s important to recognise though, that Russia’s commodities are important on several levels. Russia is more than a major producer and exporter of energy and materials; Russia is an important player within Western supply and product chains. So, targeting Russian companies has the potential to provide blow back on Western businesses and economies.
For example: Nickel is much more than a 5 cent piece in people’s pockets. Nickel is critical to manufacturing stainless steel and a lot more. Nickel prices have pulled back in recent years as supplies have had to adapt to lower global demand, but picked up in recent weeks as commodites prices turned around, and Indonesia, imposed restrictions on exporting raw ore.
One of Russia’s big players, Norilsk Nickel, extracts ore in Russia but refines its product in Finland. Overall, Russia is the world’s second-largest producer of nickel, after China. But since China consumes most of its nickel domestically, this leaves Russia as the world’s key “swing” supplier. In 2013, Russia accounted for 26% of global nickel cathode exports, or around 13% of total world consumption of nickel. Without Russian nickel, the world’s steel industry would be quickly disrupted and prices on international markets would rise, possibly steeply.
Cobalt: Although Cobalt is found in many African countries, Russia is an important supplier. Cobalt, is used in steel and alloys increasingly with military applications as it is used to harden steel based alloys for armour piercing shells, and military vehicles as armour re-inforcement.
Russia accounts for about 6% of global mine output of ore and 3% of global refined output. Most Russian cobalt production is related to Norilsk operations in Finland, where cobalt comes out of nickel production. At 6% and 3%, as noted, Russian cobalt numbers are relatively low overall, but the point is that if Western sanctions somehow choke off Norilsk operations in Finland, we’ll see the impact on global availability of refined cobalt which would only add to military hardware costs.
Vanadium: Russia is the world’s third-largest producer of vanadium – providing about 10% of the world’s supply. Vanadium is critical to hardening steel and other alloys and is a key element for the future of utility-scale storage batteries. If vanadium supply takes a hit, all manner of metal and energy projects could be disrupted. Though a small miner – American Vanadium – is about to commence mining operations in the U.S..
Tungsten: Russia is the world’s second-largest producer of tungsten (behind China) and accounted for about 6% of global supply in 2013. Don’t be fooled by that low raw number, though, because about 70% of global tungsten is a Chinese play. So that Russian 6% “global” statistic is really about 20% of what’s available to the world outside of China. Tungsten is critical to building machine tools as well as manufacturing drill bits. In essence, tungsten is used for requirements that call for hard, dense metals with high melting points. Europe is a major tungsten importer from Russia, and much European industry will have to scramble to make up for any loss due to sanctions.
Titanium: Russia is a large supplier of aerospace-grade titanium to both the U.S. and Europe, accounting for about 12% of imports. Two important buyers are Boeing and Airbus, whose operations could be slowed by lack of titanium supply, certainly in the short term. I’m guessing you can see a trend here?
Rare Earth metals may also be included in this list of essential resources that modern economies cannot do without and that are sourced, at least in part in the former Soviet Empire.
Will Russia Look More to the East?
I could go on with other energy and materials that come out of Russia, but you get the point. Western politicians may feel like they have to “do something” about Russia annexing Crimea. but they have to be careful to not bite the hand that feeds them.
For our purposes, on the investment front, one potential result of Western sanctions will be to give Russian leadership even more incentive to look east, toward Chinese markets. China is a major consumer of many raw materials and refined products and would likely be able to buy and use Russian materials that no longer move west.
Different commodities will move in different ways, of course; some more than others…
Is China’s growth story about to unravel?
David Stockman writer for the Daily Reckoning, says: China is in the greatest construction boom and credit bubble in recorded history. An entire nation of 1.4 billion has gone mad building, borrowing, speculating, scheming, cheating, lying and stealing.
The source of this demented outbreak is not a flaw in Chinese culture or character – nor even the kind of raw greed and gluttony that afflicts all peoples in the late stages of a financial bubble.
Instead, the cause is a kind of monetary madness with an oriental face. Chairman Mao was not entirely mistaken when he proclaimed that political power flows from the end of a gun barrel – he did subjugate a nation of one billion people based on that principle. But it was Deng Xiao Ping’s discovery that saved Mao’s tyrannical communist party regime from the calamity of his foolish post-revolution economic experiments.
Just in the nick of time, as China reeled from the Great Leap Forward, the famine death of 40-60 million people – depending on whose figures you use, and the mass psychosis of the Cultural Revolution, Mr. Deng learned that power could be maintained and extended from the end of a printing press – just as Western Bankers did 200+ years ago. And that’s the heart of the so-called Chinese economic miracle. Its not about capitalism with a red accent, as the Wall Street and London gamblers have been braying for nearly two decades; its a monumental case of monetary and credit inflation that has no parallel.
Will Hutton who wrote “The Writing on the Wall.” (an ironic play on the Great Wall of China) suggested back in 2007, that the mixture of capitalism and political direction, would eventually lead to a collapse in China’s economy, when investments, and prices were centrally controlled, because the market mechanism of the free flow of information in markets – the price signal – and “Contract Law” is a requirement for all modern capitalist economies to function properly.
Perhaps our own politicians and Bankers would do well to remember that too, as they force Bullion Banks into manipulating currency prices by manipulation of interest rates, and precious metals prices, but I digress.
At the turn of the millennium, credit market debt outstanding in the US was about $27 trillion, and they’ve hardly been slouches in attempting to borrow their way to prosperity. Total credit market debt is now $59 trillion; so America has been burying itself in debt at nearly a 7% annual rate.
But America has been out-banked – to coin a phrase. In 2000, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion. BUT, this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who learned their economics, when Chairman Mao was still alive. That said, the country sent highly educated senior communist figures around the world to study other cultures, and political and economic systems, so it is possible they have learned something since then.
However, it is probable, that there is no legitimate banking system in China – just giant state banking bureaucracies which are run by party operatives and a modus operandi of parcelling out quotas for national credit growth from the top, and then water-falling them down a vast chain of command to the counties, townships and villages.
There have never been any legitimate financial prices in China – all interest rates and Foreign Exchange rates have been pegged and regulated to the decimal point; nor has there ever been any honest accounting either – loans have been perpetual options to extend and pretend. Even the Yuan was pegged to the dollar at 8 to the dollar, until an agreement to enter the World Trade Agreement meant they had to freely float their currency by 2015, and China has allowed the Yuan to strengthen to circa RMB6.5:$1 – and is also behind their drive to collect as much gold as they can.
However, in two short decades, China has erected a monumental Ponzi economy that is economically rotten to the core. And, needless to say, there is no system of financial discipline based on contract law. China’s GDP has grown by $10 trillion dollars during this century alone — that is, there has been a boom across the land that makes the California gold rush appear pastoral by comparison. Yet in all that frenzied prospecting there have been almost no mistakes, busted camps, empty pans or even personal bankruptcies. When something has occasionally gone wrong with an “investment” the prospectors have gathered in noisy crowds on the streets and pounded their pans for relief – a courtesy that the regime has invariably granted.
Since 2000 China has 1.5 billion tons of steel capacity, but “sell-through” demand of less than half that amount and, on-going demand for sheet steel to go into cars and appliances and rebar into replacement construction meaning the other half is produced merely to go into surplus storage – once the current pyramid building binge finally expires.
The same is true for its cement industry, ship-building, solar and aluminum industries – to say nothing of 70 million empty luxury apartments and vast stretches of over-built highways, fast rail, airports, shopping malls and new cities.
Will this ultimately lead to a price and economic collapse? Probably, but WHEN?
In short, the flip-side of the China’s giant credit bubble is the most massive malinvestment of real economic resources – labor, raw materials and capital goods – ever known.
Effectively, the country-side pig sties have been piled high with copper inventories and the urban neighborhoods with glass, cement and steel erections that can’t possibly earn an economic return, but all of which has become “collateral” for even more “loans” under the Chinese Pyramid scheme.
China has been on a wild tear heading straight for the economic edge of the planet – that is, monetary “Terrain Unknown” – based on the circular principle of borrowing, building and borrowing. In essence, it is a giant re-hypothecation scheme where every man’s “debt” become the next man’s “asset”.
Thus, local government’s have meager incomes, but vastly bloated debts based on stupendously over-valued inventories of land. Coal mine entrepreneurs face collapsing prices and revenues, but soaring double digit interest rates on shadow banking loans collateralized by over-valued coal reserves. Shipyards have empty order books, but vast debts collateralized by soon to be idle construction bays. Speculators have collateralized massive stockpiles of copper and iron ore at prices that are already becoming ancient history.
Is this factored into China’s Plans for Empire, so that if – IF – a third world war begins, most of the materials will already have been purchased and produced, and once their currency is re-flated due to their large Gold holdings, they can buy what they need with the world’s strongest currency?
So China is on the cusp of the greatest margin call in history? Or the precipice of the biggest long term plan for global domination the world has ever seen?
Only the Chinese political class know the answer to that one.
But a Chinese market collapse would seriously affect all the world’s economies, and the Chinese have the biggest savings on the planet.
Cracks began showing in this edifice when a bank run began at Jiangsu Sheyang Rural Commerce Bank last month, as worried citizens clamoured for their money when a withdrawal for RMB200,000 (about $32,000) was refused at the Sheyang branch.
This was on the heels of the failure of several shadow banking institutions whereby several rural co-operatives and Farmer’s Credit Unions failed in recent months.
However, once asset values starting falling, these pyramids of debt will stand exposed to withering performance failures and melt-downs. Undoubtedly the regime will struggle to keep its printing press prosperity alive for another month or quarter, but the fractures are now gathering everywhere because the credit rampage has been too extreme and hideous. Maybe Zhejiang Xingrun Real Estate which went belly up last week was the final catalyst, but if not, there are thousands more to come. Like Mao’s gun barrel, the printing press has a “sell by” date, too.
Worryingly, a Chinese man was arrested for spreading rumours/information about these financial problems.
Of the more than US$562 million (RMB3.5 billion) that it owed to debtors, US$112 million was borrowed from 98 private parties with annual interest rates of up to 36%, according to recent revelations from Chinese media. Under that kind of pressure, the only surprise is that the default didn’t happen sooner. The company struggled to find capital for years; the chairman is suspected of borrowing up to US$38.6 million with “fake mortgages.”
But before Xingrun gets branded as China’s worst small, private homebuilder, it’s important to understand how it ended up in the mess in the first place, and what specific factors brought the operation down, or at least to the brink of collapse (local government officials insist it hasn’t officially defaulted yet).
Xingrun’s business in Fenghua, a county-level city that is part of Ningbo in a manufacturing belt on China’s east coast, ran into trouble through a renovation project starting in 2007, Chinese media pointed out. The company attempted, after securing government support and taking over for another distressed local property company, to build high-rise apartment blocks in a village called Changting. The project required the company to build homes for the original residents before the existing village could be torn down and the new buildings built. Construction was slated to start in the first half of 2012. Xingrun projected that it could pay off its debts within three years.
The project never got to the construction phase. In fact, the small village homes are still standing. Xingrun built the replacement homes for the villagers but there’s no sign of its main housing product, high-rises. Nothing has happened because the residents of the village have tangled the project and the company in a lawsuit that has stretched for years.
High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago. That explains why Xingrun was unable to pay back its loans. But why has it come so close to keeling over now? Its troubles with the Changting project persisted for years but the company simply rolled over loans and borrowed at high rates from private lenders.
One problem for capital-strapped developers in the Ningbo area is that private lenders no longer want to lend to highly risky companies. In fact, they are calling in their loans. This is just one of the problems afflicting Xingrun. The value of property in some areas of Fenghua is decreasing and that trend has lowered confidence in developers’ ability to pay dizzyingly high interest rates.
Banks aren’t hot on lending to this kind of developer either. In the past, a developer such as Xingrun could ask the local branch of a commercial bank for more credit. The local branch would take that risk because loan officers there knew that, somewhere much higher up the chain, officials promoted the lending.
That support exists no longer. Now, when small developers beg local banks for credit, they will likely be turned away. Local bank managers are reportedly being told that they may lend to risky borrowers if they wish, but they will be held accountable.
High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago.
Fenghua is a small town, and Xingrun’s reach beyond that area is limited. Analysts have come out strong in saying that such a default has little systemic risk. The bigger picture in the region, however, can’t be ignored.
Xingrun’s woes are still the woes of the local authorities. The default will add US$305 million (RMB1.9 billion) to Fenghua province’s non-performing loan portfolio, pushing up the rate of toxic assets to 5.27% and making it Zhejiang province’s most indebted government, according to calculations by The Economic Observer newspaper.
Add Fenghua’s problems to those of the The greater Ningbo Liberty Silver region. The area reportedly has at least six years of housing stock either sitting empty or under construction. The massive buildout will put small developers under great pressure to pay back loans, especially if private debtors are calling in high-interest loans. A slowdown in property prices won’t help either. Without a rescue from provincial-level banks, Fenghua won’t be the last local government stuck in a jam.
So what is The Coming Battle?
It will be between depositors (the people) and the Bankers when the next economic collapse occurs – far sooner than most people think. Crypto-Currencies, do not rely on Banks to transfer value between individuals, or between people and businesses, and will increasingly mean the Banks wield less power over the economy, and the state, but this means that many governments will want to outlaw them. However, if you feel you want to find out a little more on the subject at Review Outlaw.
And, you can get some free currency – HERE.
Of course if you have spare capital, putting some of it into precious metals with no counter party risk – that is – hold in your hands metal… would be considered sound advice, and if you want to know where you can buy these wonderful metals – try HERE.
Addendum: 12 April 2014
Since this piece was researched and written, the PBoC (People’s Bank of China) has agreed to provide RMB1,000,000,000,000 (1 Trillion – Renminbi/Yuan) about $153 Billion to provide increased infrastructure in rural communities, improving roads, agriculture and local amenities. So the end speculated on, won’t be happening soon; but someday the spending has to stop. (or not rise quite as much) to rein in inflation, which will probably now happen circa 2018-20.
The west too will probably make one last attempt to stave off the inevitable collapse, resulting in the final outburst of inflation. Bankers will be held to account by the people, and the result will not be pretty.
And the final analysis, will compare Precious Metals with the number of Dollars, Yen, Yuan, Pounds, and Euros in circulation.
Silver which is my favourite precious metal, is so oversold as to be the best buying opportunity for anyone with money to invest, and time to wait.
The above chart tells its own story. The MACD (Moving Average Convergence Divergence) shows when we can expect a turn in prices. When it’s high, the price turns down, and when it is low, the price turns up… You have been shown the future.
The below film, tells of The Coming Battle.
And here’s more evidence of what’s likely to follow.
“There are none so blind,
as those who will not see.”
What do YOU see?
That depends on who you ask.
If we look at the major market indicators:
House Prices at all time highs in London. (Being chased up by Chinese buyers apparently)
Stock & Commodities Markets
– Dow Jones Industrial Average – 16,572,
– FTSE 100 – 6,673,
– Gold down slightly over recent days to – 1292.72
– Silver ($/oz) – 19.97
– Brent Crude ($/bbl) – 106.57
– NYMEX Crude ($/bbl) – 101.02
– Copper ($/tonne) – 304.75
Looking at the above prices which were a snapshot on 4/4/14 – Friday lunch -time, you’d certainly think so.
Janet Yellen Fed Chair, has begun tapering – now we’re only getting $75billion QE this month, probably down another few billion next month, and lowering towards the Autumn, to zero. With employment numbers up on both sides of the Atlantic, in U.S., Euroland, and Britain.
David Cameron and George Osborne, as the two senior figures in the UK coalition are now walking around with a swagger as the next election looms just over 12months away, and the economy seems to be improving.
UK unemployment is lowering with figures heading to the 2 million mark again, and growth whilst subdued in the last month against the same month last year, probably owes more to the fact that this year, Easter is a month later, so the mini-boom that occurs as people begin sprucing up their homes which feeds through into the manufacturing sector with new kitchens and bathrooms: new electrical equipment, new plumbing, shower cubicles, flooring, furniture, kitchen cabinets, and taps getting installed.
And American Jobs seems to be improving too – albeit at variable rates. Today’s numbers though were below expectations.
But the structural mess the west has got itself into over the last twenty plus years, has not really been resolved, just as a new threat appears on the horizon.
For a few years recently, I worked in recruitment and employment services, and visited dozens of small and not so small employers selling our services, and the thing that stood out for me visiting the shop floors of engineering companies, and talking to warehouse managers, large and small, was the age range of the technical staff that worked there. They were all baby-boomers.
That’s right. These millers, maintenance fitters, service engineers, vertical borers, turners, technically skilled and semi-skilled staff were almost all without exception over 50.
They have accumulated decades of experience and wisdom, and time spent honing their skills. They have survived the countless recessions and financial booms over the time since the 1970s. They learned the basics in school in metalwork or woodwork classes. They went to Technical Colleges to do a HND, or OND in some engineering discipline or other, and learned technical drawing. They got their hands dirty messing about with things – tinkering if you will.
Many of today’s youngsters want to be TOWIE members, walk around in designer clothes, appear on X-Factor, Britain’s Got Talent, work in the Media, and Music, and be overnight successes as the 24/7 media channels focus on vox-pop issues, and makes “Celebs” of people who really shouldn’t be.
Their only real talent being for self publicity, and a willingness to make fools of themselves – on camera, and their personal lives become a mess as their rise to prominence and their fade to obscurity, wreak havoc with their self-esteem, and their relationships with those around them. But there’s only so much of that the viewing public can take.
In Britain, we are at last starting to offer apprenticeships to the young to learn skills that can’t be learned in the classroom – like turning up on time every time, as Woody Allen once observed which is 90% of success.
And keeping your nose clean (metaphorically speaking) at least until you know what you’re talking about – and even then, speaking out of turn can damage your chances of success.
But social commentary is not our beef. Political and Economic commentary is.
As the events in Ukraine of recent weeks seem to recede into the media background. And even the missing Malaysian Airlines flight MH370 seems to have gone quiet, as Australian Ships now search using SONAR technology, we need to look deeper at events worldwide, that will have an economic impact.
This morning we learn that Israel is sabre-rattling again, as Palestinians fire small rockets into that country, and the Palestinian leader discusses openly pursuing a “two-State” solution, outside the normal negotiation channels, as both the West-Bank developments, and the wall surrounding the Israeli state makes it almost impossible for ordinary Palestinians to make a living.
Of course if so few Palestinians have money to support their families, you have to ask: “Where are they getting the money for arms and munitions?”
And well you might.
Last week unmarked cargo planes, arrived in a sand lashed airfield just a short 45minute drive away from Amman. One of many such touchdowns in Sunni controlled Jordan.
The plane, one of approximately 150+ such flights in both Turkey and Jordan since the Syrian crisis began in early 2013. was filled with military equipment, approximately 3,500 tonnes in total. And this was directly authorised by the American President.
This military hardware is supposed to go to anti-Assad moderate groups who are fighting to overthrow Basher Al-Assad, President of Syria after years of dominance by the Assad regime.
Of course, not all the groups fighting for their freedom, are what they claim to be. Some contain Al-Qaeda operatives, who use their time there to get much needed experience of military hardware, and divert some of that to fights in other parts of the region.
Of course the US. media channels are prone to hide these disturbing facts from most Americans, who like the British are distracted by the media equivalent of MUSAK – that inane music that used to be so common in lifts and public spaces where they didn’t want to play anything that would distract you from shopping and spending money.
Of course Israel has its own reasons for being paranoid – almost 70 years have elapsed since 1947, when they were granted the state of Israel under a UN charter, and they have had to defend their territory from their Islamic neighbours ever since, having fought several wars, particularly during the 60s and 70s when their newly enriched neighbours decided to launch attacks on Israel for their own political agendas.
In 1967 the six days war was fought as Jordan, Syria and Egypt prepared a sneak attack on Israel, who took the opportunity to get their revenge in first, and after six short days captured the high ground in the Golan Heights, pushed the Jordanians back to the Jordan River, and the Egyptians back across the Syniai peninsula. The Arabs were humiliated, and a fresh war in 1973 – the Ramadan War was their attempt to take their revenge. The two wars helped push up oil prices already rising from increased demand, and it was this that was the major driver of the price rises that raged that winter of 73 and into 1974 pushing inflation to 26.9% in late 74 in the UK. Then the Iranian revolution in 1979, when the Shah of Iran was ousted and chased overseas allowing Ayatollah Khomeini to return from exile in Paris, and the scene was set for 21% inflation the next year, as oil prices once more reacted and the west would again be mired in recession.
As the war in Iraq and Afghanistan comes to an end, and troops begin returning home to bases closer to home, those troops were keeping a lid on sectarian violence that goes back 1300 years.
These wars are similar in effect to the Vietnamese war where Americans lost 56,000 personnel, and spent countless billions of dollars on arms and equipment for their forces stationed there.
These American involved wars were both funded by a government able to buy goods and services essentially for FREE as the Central Bank – The FED, creates money out of thin air, and this allows America to throw its weight around in places it shouldn’t really be, and where it lacks the knowledge of the culture to make improvements in the country without first destroying much that was there already.
In the middle east, this lack of knowledge has cost it dear with rises in Terrorism. The Islamic world also suffers a schism, divided just as Christianity is into two major factions, but this divide began one day in 629 A.D. as the prophet Mohammed sat down to a lamb or goat dinner that would begin the split that has affected middle-eastern politics ever since.
The meal was poisoned, and while Mohammed tasted the poison and spat it out, he had already bitten off more than he should chew, and on his demise which was sudden, no one could agree on who should replace him. The two views of Islam, one backward looking, one more progressive, became like Catholicism, and the Church of England who split apart when King Henry VIII decided he wanted a divorce in 1533, so he could father a child with yet another new bride who he married when it became obvious his bride-to-be was pregnant. (Divorce was a taboo of Catholicism)
The Islamic split though is the reason we may yet be plunged into another economic malaise.
The Shia population consists of about 70million Iranians, 22million Iraqis, 2million Lebanese, 4million Syrians, 10million Yemenis, and in the Arabian Peninsula populations of 700,000 Kuwaitis, half a million Bahrainis, 300k in Oman, 400k in UAE and another few hundred thousand dotted about the middle-east, with upto 11million in Turkey, 7million in Azerbaijan, and upto 30million in the hills of Afghanistan and Pakistan – between 145-160 million in total.
Many of those Shia side with their Palestinian brethren in the eastern Mediterranean, and the split I mentioned harks back to a time that Iran was called Persia, which many will remember ruled the Persian empire in the centuries around the time of the Holy Roman Empire and beyond.
Iran, according to Byron King a Harvard geologist, a former US Navy pilot, and Military intelligence officer with high military clearance, believes the real reason Iran wants a nuclear device is because its near neighbour the Kingdom of Saudi-Arabia dominates the region thanks to oil and American military support, and with Iran’s growing population of upwards of 88million, and one of the largest oil reserves in the world, Iran nurtures a yearning to return to its former glory days of the Persian Empire.
And, lest we forget, the Persians invented Chess, Algebra, traded with China and built the hanging gardens of Babylon, invented bricks and before the Islamic rules against alcohol – invented wine.
And as Iran recently launched its second naval vessel into the Caspian Sea as oil resources there become important, this is just repeating what they did 1500 years ago when they held off Roman armies.
Iran if you know your geography well, sits on one side of the Persian Gulf, where 40% of the world’s oil gets to market, and where 90% of the oil exported from the middle east passes through the narrowest point, at just 21 miles wide – the Straits of Hormuz.
But, what most people don’t know is that middle-eastern oil was first found in Iran in 1908, and Western oil majors swooped in to fuel Western growth and the war machine that would be so important in the war that was to come in Europe, so there is bitter resentment still.
On the other side of the Gulf is Saudi-Arabia, Oman, UAE, Qatar and both North and South Yemen who are mostly Sunni muslims. Yemen covers the whole of the Southern Arabian peninsular to the Red Sea, across from which, sits the Horn of Africa, and the narrowest point known as Bab El-Mandeb – or “The Gates of Tears”.
These shia controlled nations have over the last 50 years surrounded Iran’s mortal enemy – the Kingdom of Saudi-Arabia, who helped fund Saddam Hussein for 8 years, during the Iran/Iraq War in the 1980s, in which Saddam launched Scud missiles into Iran, and gassed thousands of his Shia citizens.
To the west of the Saudi peninsula sits the Red Sea, facing Egypt, Sudan, South-Sudan, Ethiopia, Eritrea, and other hotbeds of unrest.
On the south of the Saudi peninsula -Yemen, has a particular section of the Shia population who are the Huthis. In a recent incident in the Indian Ocean, off the coast of Yemen, a US naval vessel stopped an arab Dhow – a small sailing ship with a broad trangular sail, and the sailors found not fish as might be expected from such a small vessel, but military hardware destined for Huthis, Al-Qaeda operatives now headquartered in Yemen.
This hardware wasn’t just a few rifles, and handguns, but military binoculars, sophisticated explosives, detonators, and both ground to ground rockets, and heat-seeking portable anti-aircraft missiles – Not the kind of stuff you find in a military hardware supplies’ shop. And the source of this booty? You guessed it – probably Iran.
So, why is Iran selling armes to rebel groups or giving them away?
Who is funding Al-Qaeda?
It is just possible, that to maintain its grip on the society, Iran needs a high oil price and fomenting unrest in the region, to heighten the perceived risks in the area, is one way to achieve that, or is it really just part of a master plan to unseat KSA from its dominance in the region.
And if Iran and the Kingdom of Saudi-Arabia DO go to war, the battle would embroil all who depend on middle-eastern oil to make their economies run, as the price of oil would spike on International markets.
If a new battle between the Sunnis and Shia erupts, the Arab Spring 2.0 will seem like a cakewalk, and the oil price could hit $200+/barrel. Is this why Abu-Dhabi recently spent $17bn on anti-missile hardware? And UAE and Saudi-Arabia have also splurged on weapons and British Fighter Aircraft.
Is this the real reason America is pursuing shale oil and gas with such fervour?
Recent reports suggest that U.S. now holds the biggest energy reserves on the planet.
In the Bakken oil fields alone in north-western America, the US Geological Survey suggested there might be 500+ billion barrels of oil, and a more recent survey, suggests that there is even more oil buried beneath the already huge Bakken field.
This with the West Texas shale oil-field – the Eagle Ford basin, the Monterey shale in California, the Utica shale gas and liquids finds in Ohio, the Mississippi basin oil find and the shales in the North East – could add upto 2 Trillion barrels. Enough for 100 years, and the U.S. could already be the world’s biggest producer.
And as I’ve mentioned on a previous occasion, the U.S. intends liquifying some of these natural gas finds and exporting them at international prices.
Companies way ahead of the rest of the industry are – Cheniere Energy, (NYSE:LNG) who signed a 25 year deal with Centrica – owner of British Gas, to supply LNG and similar contracts with 4 others including Spain’s “Endesa Generacion S.A.” and Indonesia’s “PT Pertamina” from its Corpus Christie liquifaction plant, via its new export facility it is building in Sabine, Louisiana.
Together with Cameron LNG who obtained approval from the U.S. Department of Energy (DOE) to export up to 12 Mtpa, or approximately 1.7 Bcf per day, of domestically produced LNG to all current and future Free Trade Agreement countries and on February 11, 2014 received conditional authorization from the DOE to export LNG to non-Free Trade Agreement countries, including those in Europe and Asia. It should also be noted that the Panama Canal is being widened and due to open in 2015, to allow the huge LNG cargo ships that will be needed to carry all this oil and gas to China.
Cameron also has an application under review with the Federal Energy Regulatory Commission, the lead agency responsible permitting the new facilities. This new facility in Hackberry, Louisiana was an import terminal, but it is being specially adapted for export. This company therefore faces long-term growth as their facility sits alongside major pipelines from most of the major sources of Gas.
The completed liquefaction facility will comprise three liquefaction trains capable of exporting up to 12 million tonnes per annum (Mtpa), or approximately 1.7 billion cubic feet per day of liquefied natural gas. In addition, a new 21-mile natural gas pipeline, a compressor station and modifications to existing pipeline interconnections are proposed. Construction on the project is already underway, with the first LNG production in 2017, and full commercial operation in 2019.
The new and existing facilities will be wholly owned by Cameron LNG Holdings, LLC, a joint-venture with 50.2 per cent indirectly owned by Sempra Energy (NYSE: SRE) and the remaining owned by GDF SUEZ S.A. (GDF SUEZ), Japan LNG Investment, LLC (a joint venture entity that has been formed by subsidiaries of Nippon Yusen Kabushiki Kaisha (NYK) and Mitsubishi Corporation (Mitsubishi)) and Mitsui & Co., Ltd. (Mitsui) each owning a further 16.6 per cent.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2010 revenues of $9 billion. The Sempra Energy companies’ nearly 16,000 employees serve about 26 million consumers worldwide.
And if you’re wondering who is going to build this new facility – on March 17, 2014 Cameron LNG, LLC announced the joint venture between CB&I and Chiyoda International Corporation, a U.S. based wholly-owned subsidiary of Chiyoda, a Japanese Oil Services Major, had been awarded the contract valued at approximately $6 billion. – CB&I (NYSE: CBI) and Chiyoda Corporation (TSE: 6366; ISIN: JP3528600004) – I wonder what that contract will do to their bottom line?
Also, a recent off-shore find in an area called “Tubular Bells” basin in the Mississippi Canyon – Gulf of Mexico, has given Hess Corporation (NYSE:HES) an independent oil major a fillip.
The company estimates that the field will have a peak production of 40,000-45,000 boe/day. The field holds more than 120 million boe of reserves and possibly as much as 200 million barrels, according to Hess, but as these finds add to the US output, we may yet see oil prices level off (in the absence of Middle-Eastern turmoil), though it is likely that output will not begin for a year or so.
The prospects for these companies is all the more important if the disruption in the middle-east curtails output, or raises tensions there, as the value of the reserves and any output, will merely add to the bottom line of these American Corporations.
However, any prolonged rise in oil prices would raise the QE question again, and cause major problems for importing nations such as Japan, and Germany which does not have any major oil fields.
And if the price of oil rises, then it is inevitble that Gold and Silver will follow suit, whether China decides to announce its Gold reserve position this month or not. (See my last post)
If any more currency gets printed by the Fed, as a result of all this oil money sloshing around the world? Then you better get yourself some alternative currency, as thes crypto-currencies become more widely accepted, and for those who are interested in a new business that mines for currency, and makes an initial deposit, and daily top-ups into your account – with referral fees for any new members found, you can get details and membership for free by clicking —>> HERE.
If you liked this post then please like it, post it to family or friends, or copy and paste, but remember the discussion of the above companies is not a recommendation to purchase. But merely to offer a starting point for your own research. Share prices can go down as well as up, and any investment may be at risk.
My most recent post, hinted at the technological revolution that is just underway, as the digital revolution enters phase two.
I talked about how mainframes were superceded by mini-computers for medium sized businesses and universities, and at how that begat their widespread adoption which led acadamic institutions to seek to share their intellectual resources via the research network – Arpanet. This followed on from the former Darpanet, which was supposed to be a way for the U.S. military to communicate, if in the event of a nuclear attack many of their telecommunications systems were wiped out. That was the start of Phase 1.
The network settled on TCP/IP as the protocol – Transmission Control Protocol/Internet Protocol which is where we get our IP addresses from. (and the NSA knows where we are and monitors our communications – but that’s another story)
Anyway, as this revolution is throwing up some prospects for making money, the other side of the coin is that many jobs that have existed for many years, may be about to be wiped out. If your employment is in one of these industries, or sectors then perhaps it’s time to consider the alternatives…
BUT, where to start?
The starting place is “Funny money”… That’s what many people call money they’re not sure about. Monopoly money. Money that doesn’t feel right.
Well, when the Central Bank uses “Quantitative Easing”, which is a euphemism, for creating new money, to lend to the big core banks of the banking system. In essence these Banks, they’re supposed to lend that money to other institutions and/or government (via Bond purchases), and businesses then the economy will grow – so goes the thesis.
And of course, the Central Bank to end all Central Banks – The Federal Reserve, with its un-backed currency – can effectively be the lender of last resort to half the known world. via its tentacles – the BIS (The Bank for International Settlements) and the IMF (The International Monetary Fund) which is part of the World Bank.
Now when the Central Bank prints money out of thin air so to speak… that’s fine, but when a businessman prints, or copies this fictional money (Fiat money, or money by Diktat) then the central authorities get nervous. Of course you can’t copy or print Gold or Silver – well, not really, (except by creating derivatives) which is why the Bankers and the politicians in their pockets don’t like it – but I digress.
In the Huffington Post and AOL this morning, it was reported that two Asian Businessmen – brothers – took the Xmas break in 2012, to print up £1.27 million of their own. They and two others, got upto seven years in prison, in their final hearing in December last.
Different rules for different people springs to mind? And don’t get me started on JP Morgan’s affairs, it seems their fingerprints have been over almost every financial scandal of the last ten years, including the Bernie Madoff affair, but we’ll save that for another day.
No, this technological revolution including currency revolution is gathering pace. In France I heard yesterday, that up to 20 new local currencies have been created and are circulating in localities, as people seek to stop their money from leaking out into the wider economy, to protect their own jobs and the village or town they live in. The free market strikes again…
These local currencies are also appearing in the USA, where across several states, local currencies are appearing. If we add in the 80 (or so I hear) crypto-currencies, the most widely known ones being Bitcoin, and Lite-coin, it appears the Bankers are going to have a real problem going forward as alternatives to their FIAT money systems abound.
What is making it worse we learn is that their traditional business of “Lending” is also under attack too, as the Internet now allows depositors with money to save or salt away – you choose your perspective – can now lend direct to borrowers through “Peer to Peer” lending web-sites, and crowd-funding. Even business finance I learned yesterday can be got on-line via financing web-sites. if we add in the ETFs, which use savers money to invest in the largest corporations, and in the UK, Investment and Unit Trusts, then the world is awash with alternatives to the old system of Bankers collecting savers cash, and using it to invest in the economy.
If the internet has changed anything, it is that geography is not the restriction that it once was, but that this will have a dramatic effect on our whole society. (But we also need to be aware of moves to restrict free access)
Anyone who has been down one of Britain’s High Streets recently, cannot have failed to notice how that has changed in the last 5+ years, as new under cover Malls sprang up during the boom years, and stores on the uncovered main streets now remain empty – with boarded up windows to protect them, and advertising, suggesting that sometime soon, some wonderful event is about to happen.
But it got me thinking, if this technological revolution is affecting Britain’s HIgh Streets as more of us shop on-line, and Britain’s Banks as more of us find alternatives to the currency, what will happen when Google manages to perfect its driverless car?
A report I saw over the week-end suggested it wil be perfected and regulated within the next five to ten years. So, if we have driverless cars, will we need driving licences? And if not? Do we need Driving Schools? So if you are BSM, AA-Driving School, or any one of the thousands of small businessmen and women who run a driving school from home, then this revolution is not going to leave much by way of business, and thus employment.
So if there are fewer and fewer jobs… Are we about to return to pre-industrial revoluton days, where we all operate a small-holding and the modern equivalent of a spinning-wheel in our kitchen with a 3d-printing press, churning out our own stuff, which we buy as raw materials and exchange these with our neighbours?
And if so? What about those who don’t have these devices, or can’t afford the raw materials? What if you are one of the thousands of people whose job it is to regulate industry, push paper and electronic digits around, write e-mails to other departments, and generally keep tabs on the productive sector of the economy, such as the IRS or HMRC?
Under the previous administration, this army of beauraucrats grew to over 40% of the economy. That means that for every pound earned by the private sector, over 40pence went to pay for people who merely watch what other people do in some way shape or form, and make sure they comply with someone else’s vision of what is right and proper. Even the military are increasingly being used to resolve disputes between neighbours – even if the neighbours happen to be Muslim and Christian, or Muslim and Jew, or even different versions of Islam.
Will the technological revolution therefore mean these people will have to find alternative work? And if so What?
The skills to manage a small business are manifold. As a former Business Studies Lecturer, I thought I knew it all (or most of it anyway), but after leaving the confined spaces of academia, I learned that in the real world, you have to be constantly looking at the horizon to see where the next threat is looming to your current business model, and to many small businesses, wrapped up in the day-to-day business of running their business, it is hard to find the time to stay one step ahead.
It therefore, suggests we’re all going to have to think differently about our money, employment and investment. Investing in ourselves, in our knowledge and in other prospective businesses.
Robert Kiyosaki famously currently promotes self improvement through Network Marketing, though ten years ago, I saw a report that predicted the death of Network Marketing, and which, I’ll make available free in a future missive. BUT Affiliate Marketing, which is the on-line equivalent, perhaps holds greater promise. And as for investing? Well until such time as we can manufacture Gold, or Silver, these precious metals, the real stuff, that has been the preserver of wealth for 50 centuries, will have to do.
And given the amount of QE that has been pumped into the system these last six years, the value of raw materials is rising inexorably, and one day soon, that will have to show up in the inflation numbers. As much as the inflation figures and for that matter the jobless numbers have been massaged since the last great financial crisis in the 1970s, Shadowstats.com, has tried to show the real figures and paints a very different picture.
On shadowstats.com, the current inflation rate as calculated back in the 1970s is 8.5% in the U.S., rather than the 2.0% we learn that the U.S and Britain is currently experiencing. And the U.S. jobless rate, recently reported as down to 6.7% is actually over 20% and rising, if calculated as it was in the 70s. Are we to assume Britain is so different from the U.S.? RT this morning suggested that corporations are minimizing price rises, by reducing pack sizes to avoid price hikes. But this can’t go on forever…
Of course, the Black (or grey) economy will undoubtedly add to the real economy, but always fails to show up in the government’s books. Is this perhaps one of the few – Growth markets?
For those interested in investing in 3-D printing, and those who will take advantage of the technology, and even 4-D printing – (a subject for a future post perhaps) they should check out the activites of the following:
Autodesk Incorporated, – ADSK:US
Hewlett Pacquard – HPQ:US
ExOne Corporation – XONE:US
Organovo Holdings Incorporated – ONVO:US
Stratasys Ltd – SSYS:US
3-D Systems – DDD:US
Thermo Fisher Scientific Inc. – TMO:US
General Electric – GE:US
Dassault Systèmes – DASTY:US
It seems our changing technology, will make fortunes for some… Of course the usual rules apply – these are not recommendations, but merely for educational purposes, and further research – as you might often see – DYOR – (Do You Own Research.)
And if you’re even thinking about finding an alternative to that job, that might disappear down the road, there’s dozens of simple, low-cost or almost FREE ways to get started.
Six Degrees of Separation? They say that we are just 6 people away from anyone on the planet. Be that: Hugo Salinas-Price, Al Gore, David Cameron, Barack Obama, Wen Xiao Bo, Warren Buffett, Bill Gates, Richard Branson or Angela Merkel. You might have a brother or sister, cousin or Aunt, involved in local politics, who met a senior politician, who met one of the above during a political rally, who knows all the others…
“It’s not what you know, it’s WHO you know” – How many times have you heard that? Well, your network of contacts knows someone, who knows someone, who knows someone… Who might just know one of the above, and building a network, whether via Social Media, or via an Affiliate Marketing network, the sooner you get started, the better.