Financial Sense Blog

The worldwide race is on and escalating for the next generation of low cost high output battery storage system technology that will power our hybrid and electric automobiles as well as every other battery powered device and gadget in the 21st century.

While central bankers are “experts” on economic theory, we would all be well served if they had a little education on real world physics—that is, those immutable laws governing the universe that aren't subject to the whims of economic mis-interpretation. One of the most well-known of these comes from Sir Isaac Newton’s three laws of motion, which is that for every action there is an equal and opposite reaction.

It was Otto von Bismarck who explained that “politics is the art of the possible.” We can thank him for that much, but he didn’t tell the whole story. I’ll give you the rest of it. Politics is the art of the possible fictions you can get away with.

Wikileaks most recent report reveals that a senior Saudi government oil official has disclosed what many have suspected for quite some time--Saudi oil reserves (some of the largest in the world) are greatly overstated. Perhaps even by 40%. Where does this put us on the peak oil timeline?

Yesterday, a client forwarded us a copy of a chart from an article, Stocks Remain Poised For A Steep Decline. They asked for our interpretation of an ominous looking chart showing a negative divergence between the S&P 500 and the Summation Index.

In an energy-constrained world, what was formerly possible is no longer do-able, things don't work right, and there seem to be persistent shortages of everything from growth, to money, to food, to goodwill. What used to work doesn't. It is at these points that the prior stresses and imbalances are most likely to snap and suddenly change the world.

At the end of December we posted a commentary titled “Three Things that could Halt Gold’s Run.” We theorized that strength in conventional markets pressures Gold. When stocks perform well, mainstream gurus and stock jocks can ignore Gold. They will continue to until stocks peak.

The global financial cataclysm is mushrooming with every stroke of the keyboard at a central bank, with the issuance of new debt to cover old debt, and with the illusion of creating money out of thin air. It is all debt, nothing else, with no final settlement…. EVER. You exchange the money you work for and save and buy a government bond; they print the money to pay you back and PRETEND you have been paid. The situation is just as Von Mises outlined:

With the advent, then the continuation of the Quantitative Easing exercise in hyper-inflation and capital destruction, the US Federal Reserve has perhaps taken its deeply damaged reputation as a central banker and decimated it into shreds. They have lost the respect of the world, more so outside the nation's borders than inside.

We are very bullish for the long-term for the resource sector, i.e., gold, silver and the resource shares. However, we need to live life and the markets in real time and the question is where are we now and what should investors do, if anything?