Richard, the Real Economy Was Sacrificed to Financial Markets.
Let's look away from gold for a second and consider oil (the infamous "missing barrels" issue), silver, food, etc. What you will find across the board is that abstract trading vehicles (COMEX, NYMEX, LBMA etc.) have been used to effectively over-represent the available stock of the underlying commodities to the market, thus lowering the price, diverting capital away from development and leaving us critically vulnerable to shortages.
1. Oil - The "Missing barrels Issue" consider these quotes from Matthew Simmons
"...last April when the IEA announced that over two-thirds of the massive oversupply the world was experiencing in worldwide oil supply had failed to show up yet in any observed petroleum stocks. At the time, their Missing Barrels totaled about 150 MMbbl of petroleum supplies..."
"What this issue really means is one of three things. First, the system of measuring and reporting petroleum stocks has gone badly awry for the first time in many years....The third alternative is that the barrels did not exist in the first place."
"The sheer thought that the worldwide oil market could suffer its worst collapse in the 20th Century through such a tiny oversupply highlights the danger of pricing oil so heavily on futures contracts at the New York Mercantile Exchange."
"The 1998 collapse in oil prices will alter the world's 1999-and-beyond oil supply. Now, any significant upturn in demand could almost certainly not be quickly supplied."
worldoil.com
Richard, we also know that the independent producers think something was awry with oil pricing in 1998, as the anti-dumping case indicates...
biz.yahoo.com
More, importantly, IEA now forecasts a possible shortage for 2000. How did we go form glut to shortage overnight based on a relatively meager OPEC supply cut?
2. Silver - "Secret" Silver Stocks
Here's a market that is so wrong-footed its ridiculous.
Some common sense from Butler
"Herein lies the crux of my permanent shortage argument. If the world has consumed 95% of total known inventory of silver over the past 50 years, what will the future hold when the last practical inventory of silver is depleted at current prices, and supply from current production must satisfy current demand? If you think I'm alluding only to sharply higher prices, you are not getting my drift...I'm not talking about producing an extra 10 billion ounces, like we had 50 years ago; that will never happen. After all, that massive inventory buildup took the world thousands of years to accumulate because there was no industrial demand to that point. I'm stating we couldn't even produce 1% of that (a real 100 million ounce surplus) under the most extreme conditions...."
gold-eagle.com
Here again, the response is to point to "secret" silver stores.
From Armstrong:
"The only purpose behind moving silver from NY to London is to provide a cloak over what activity was really taking place."
pei-intl.com
Also, I think that last year's law suits and CFTC investigations were a warning designed to effectively eliminate upside speculation in the silver market. It probably worked. So if this market breaks down, it will be purely as a result of industrial demand.
3. Wheat? Corn? Soybeans? Electricity? I haven't seen a similar treatment of these commodities. At the same time, if our administration, central bankers et al. spent nearly as much time making provisions for adequate supplies of REAL things as they do bailing out paper claims to real things, we'd probably be less vulnerable to a weather shock. In fact, over all we've been very lucky with weather in the 90's (mild winters, etc.)
What do you think? |
