Resource Nationalism Portends
Profits and Conflict
Food Supplies at Risk - Will Hoarding Cause Gold & Silver Price Spikes?
by DeepCaster LLC, deepcaster.com | April 28, 2008
PrintSkyrocketing Food Prices are much in the news in recent months.
Almost as much in the news are the recent efforts of National Governments to protect Food Supplies. In the past few months, Egypt, Cambodia, Indonesia, and Tanzania have banned the export of certain foods. India and China also imposed severe food export restrictions. And, most recently, Kazakhstan, a large grain exporter, imposed a total ban on the export of wheat.
These developments have long been predictable since world population has increased by over 1.1 billion people since 1975, but arable land devoted to food production has not increased since 1989. Moreover, food production likely cannot be expanded significantly beyond current levels because most of the land which could be brought into production today is marginal land, and not prime farmland.
Thus one can understand why Nations are acting. The skyrocketing prices and diminishing availability of foods have caused Food Riots in over 30 countries since the beginning of 2008. Food Hoarding has become widespread, and one can only expect it to worsen.
And, in the USA, the ostensible breadbasket of the world, shoppers have been limited to one bag of rice each at the Mountain View, California Costco Warehouse. And the Costco in Queens, New York imposed limits on purchases of oil and flour. Similarly, Walmart’s Sam’s Club limited customers to 4 bags of some varieties of rice.
National Governments know they must attempt to provide Food Security for their populations as an absolute Number One Priority.
Food Supply - - Not Just a Price Issue
But, given burgeoning population growth, national governments have a challenge. The world’s food supply is not increasing to match population increases.
Indeed, the collision course between World and U.S. population growth (about 80 million a year for the world, about 5 million annually for the U.S.) and world agricultural production capacity, and increasing energy demand, has hit the front pages, and has thus commanded the attention of prospective investors. Moreover, there is one major exacerbating factor - - significant staple foods are now being used for fuel - - corn and sugar, for example, are increasingly being used for ethanol production.
Couple the population-growth-generated supply shortage with the increasing use of food for fuel (ethanol) and you have the makings of a serious and worsening crisis. This crisis is not good for anyone except certain investors in agriculture. Indeed, Deepcaster has just recommended an investment in agriculture with high upside potential in his latest Alert posted at www.deepcaster.com.
Given these facts, the United States itself has a major challenge. Its population is growing by 5 million per year (about 90% of which comes from legal and illegal immigration - - about half from each in the past decade). With a 5 million per year population increase the problem of obtaining and maintaining a food supply has only just begun to surface, in the United States as well as the rest of the world.
Yet the U.S. Congress has apparently committed one-third of all U.S. corn production to go to ethanol production. This was not a wise decision because ethanol is a net energy loser - - when all inputs are considered, it takes more energy to produce ethanol than one gets from burning it.
Resource Nationalism in Energy
Energy supplies, too, have also given rise to Resource Nationalism that is reflected in energy being used as a geopolitical weapon. For example, Russia has used natural gas price increases, or the threat of them, to affect several Eastern European and other neighbors’ political decisions.
Of course, OPEC was the original late 20th century Resource Nationalistic Cartel for Crude Oil. In recent years, however, its power has diminished, in part, because of the ascendancy of The Fed-led Cartel* of Central Bankers and Allies who effectively collectively manipulate Crude Oil and other Strategic Commodities prices.
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*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Central Bankers and Allies to read Deepcaster’s January, 2008 Letter containing a summary overview of Intervention entitled “Market Intervention, Data Manipulation - - Increasing Risks, The Cartel End Game, and Latest Forecast” at www.deepcaster.com>LatestLetter. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.”
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Will Resource Nationalism Cause
Precious Metals Hoarding and Price Spikes?
The Rebirth and strengthening of Resource Nationalism in the Food and Energy Sectors, and concomitant price rises and hoarding, leads to the question: Can Hoarding and the accompanying Resource Nationalism and price spikes happen in Precious Metals?
To frame that important question specifically: Could Resource Nationalism create sufficient additional upward pressure on Precious Metals prices to cause them to spike up and blow out of the Vise-grip of The Cartel* Price Manipulators?
Consider the following: Gold and Silver prices are (or should be, but for Cartel Intervention) “the beneficiaries” of the increasing disenchantment with paper Fiat Currencies, Treasury Securities and particularly, disenchantment with the U.S. Dollar and U.S Treasury Securities. Indeed, as “Safe Haven Assets”, they should be the beneficiaries of all the uncertainties and risks in the financial markets about which we, and others, have written extensively, and that should be reflected in their price.
Distrust of Fiat Currencies, Treasury Securities, and other Paper is especially prevalent in societies like China and India where the Gold is traditionally regarded as a store and measure of value. Thus Gold is a prime candidate for National Accumulation and Hoarding.
Couple that fact with the general insecurity in the financial markets and the perceptions that fiat currencies are perhaps “not worth the paper they are printed on” and it could create nearly irresistible pressure on The Cartel* as they continue to try to cap Precious Metals prices.
[Of course, this could impel The Cartel to begin to implement its Ominous “End Game” soon - - see Deepcaster’s June, 2007 Letter “Profiting From the Push to Denationalize Currencies and Deconstruct Nations” and February 29, 2008 Article “Increasing Systemic Risk Portends Cartel ‘End Game’ Attempt” at www.deepcaster.com.]
Perhaps Silver is a better candidate to successfully resist Cartel Price Capping than is Gold. Silver is not only a Precious Monetary Metal, but also gets used (and often used up) in a wider variety of industrial processes than does Gold. In fact, it is essential to several of them. For example, Silver is used in a variety of high-tech applications ranging from cell phones to PCs. And it is used also in a variety of medical applications as a bactericide and for other related uses. As such, Silver is a prime candidate for Hoarding by Nations.
Indeed, in 2008 there is increasing evidence, albeit much of it anecdotal, that physical Silver is getting harder and harder to obtain. There have been increasing numbers of reports that it is very difficult or impossible to buy Silver Eagles, 90% Silver pre-1964 U.S. Coins, and other physical Silver.
Will Resource Nationalism Defeat The Cartel?
Consider that the two Cartel-generated Takedowns of Silver (and Gold) in March and the two in April, 2008 (all of which were forecast in advance by Deepcaster) show that The Cartel is still quite potent and can still take down the Silver (and Gold) price in the quoted organized exchanges, such as COMEX. But consider also that Silver in the actual physical Silver market (e.g. coin stores) is obviously harder to get at any reasonable price.
Also consider that, if the Resource Nationalism that we have seen manifested in Food and Energy spreads to the Precious Metals that will have other ramifications. An explosion in the price of Gold and/or Silver (caused e.g. by massive Chinese or Indian buying and Hoarding) would be accompanied by tremendous hit to U.S. economy and paper (i.e. Treasury Securities and the U.S. Dollar). And since the U.S. is still one of the largest markets for consumer goods and services (for e.g. India and China), any such massive purchases might destabilize U.S. markets thus hurting goods and service suppliers. China, for example, would certainly be most reluctant to do that to its largest customer.
On the other hand, countries clearly know when their National Interests are at stake, as they clearly are in Food and Energy. That recognition means that one cannot discount the possibility of Resource Nationalism spreading to the Precious Monetary Metals thus creating truly irresistible upside pressure.
Such irresistible pressure has not yet been generated, as recent Cartel Takedowns of Gold and Silver demonstrate, but it could come surprisingly soon. Be Alert.
Copyright © 2008 DeepCaster LLC
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