-- Posted Wednesday, 21 November 2012 | | Source: GoldSeek.com
In
the first part of this article we looked at the sad events that appear
unavoidable in 2013 and beyond, despite the best efforts of politicians
and monetary officials. We then said events are on the way to bring
nations in the developed world the ability to survive these blows.
Oil Self-Sufficiency in the U.S.
The
first point of hope pointing that way came from the news that the U.S.
is headed to becoming the world’s largest oil producer in the world,
even ahead of Saudi Arabia. Through the use of a system of “Fracking”
(the pumping of water into oil wells to extract remaining reserves) the
U.S. will become not only self-sufficient in oil by 2016 but could
become a net exporter after 2020.
It
current dependence for 20% of its oil needs from imported oil will
disappear. The consequential impact on the U.S. Balance of Payments will
be dynamic. Strategically and politically the U.S. will look
considerably more robust. It remains to be seen whether it will save the
dollar or its buying power but it will give resiliency to the U.S.
economy it sorely needs now.
Considerably
lower oil prices –which we imagine will follow, but not necessarily so—
inside the U.S. will have a dynamic impact on the profitability of the
U.S. economy and the underlying state of its economy. We cannot say
whether this will be enough to provide enough growth to absorb the
massive money supply we currently see threatening ‘stagflation’ or not.
We cannot say that it will arrive in time to do so either. We are too
far away from these events to paint an accurate picture of their impact.
But the change will remove the danger of a collapse of the U.S. economy
and the dollar, provided politicians have not caused it already.
Oil Self-Sufficiency in the Eurozone
The
news that the Eurozone may become self-sufficient in oil as well is
very new news as well. Yes, “Fracking” could do the job in the old
Eurozone oilfields but better still, it appears that Albania has as much
oil as Kuwait and that it is light crude oil. This is favored by a
Europe with a rising dependency on Russia for gas and oil that makes it
uncomfortable. Being able to access Albanian oil (still 5 years plus
away) will lower dependency on Russia and on the Arab suppliers of oil
to those nations. Not only that, but the Eurozone’s balance of payments
will look far healthier and provide the same buffers that U.S. oil
self-sufficiency will do.
The
protection against outside economic shocks that such oil independence
will give the Eurozone might eventually save the euro’s bacon.
Loss of the “Measure of Value”
The
events now taking place in the monetary system and the financial
markets and those that will happen in the future will not be conducive
to a sound dollar even with oil self-sufficiency. Right now the dollar
and the rest of the world’s currencies have lost a considerable portion
of their ability to measure true value. This has been pointed out by
much respected monetary leaders in globally respected institutions over
the past few years. We cannot see this changing.
For
the monetary system to survive the shocks that lie ahead, in the
relatively near future (bear in mind that medium term has not been
reduced to five years and long-term to ten years) a great deal need to
be done to reinforce it, to withstand the shocks that lie in wait for it
and for us. In its present form, the unbacked paper currency system,
entirely dependent on the confidence that governments can garner, looks
far too vulnerable to even stem the further decline in confidence in
currencies.
Worst of all, that loss of confidence is being seen inside the banking system itself.
It’s there that it needs to be combated first. The sight of banks
unwilling to lend to each other in the last couple of years and their
placing liquidity given to them to resuscitate lending in the economy
back with their central banks highlighted those dangers. Presently
attempts at modifying the system to face these threats is moving at such
a slow pace that they will be too late.
Bear
in mind that the state of the global banking system has been shown to
be the top priority of both government and central banks with measures
taken to date designed to rescue them and not the consumer. We expect
this to remain the case in the future!
Monetary System Adjustments Accelerated
But
at the start of this article, we pointed out that any view of the
future must be pragmatic and face current realities. The monetary system
will not be adjusted until present events demand it. Then the sight of
scrambling monetary officials will be on the news daily as they
accelerate adjustments to stave off collapses. As it is, the chances of a
financial accident on both sides of the Atlantic have increased
exponentially. When push comes to shove, the plans already in the works
will appear out of the blue. This we believe will include those on gold
taking it to a level I asset on bank balance sheets.
One
of the prime adjustments will be the movement of gold to a pivotal
position in the system, not being directly used in line with its market
value, but in the background, much like a guarantee is used. To use it
at its market value is to undervalue its capabilities in a monetary
role. It’s quite correct to reject the idea that gold will be
confiscated to expand the money supply. Central Banks need no assistance
in this. They already do it without reference to gold. Gold has
considerably more value than paper currencies have in another way.
Provider of Confidence
Gold will have to act as a counter to currencies
rising in value as they fall. It must be harnessed to provide liquidity
at reasonable rates as was the case when involved in the gold/currency
swaps undertaken by that central bank of central banks, the Bank of
International Settlements three years ago and thereafter in a less
discernible role.
Its
prime function will be to act as defense, as back-up to paper
currencies. Its role will be to provide confidence in currencies when it
is waning visibly. And we’re not far from that happening on a broad
front.
No comments:
Post a Comment