by Scott Causey, GWP Resource Correspondent
We all take things for granted; our wives or husbands, fresh clean pottable water, using the ATM card at every corner and having Charmin (US dollars) dispensed to us. Many decades have gone by since the last time most humans in developed nations have had to use any semblance of the “hunter gatherer” mindset. Everything is provided, assuming you have fiat money to obtain it. You control the temperature in your house with the push of a button. You sit on your ass in air conditioned, leather-wrapped luxury and are hurtled towards the destination of your choice at 80 feet per second with your only “effort” being the flexion of your right ankle. Food is obtained with the same amount of effort. Only in times of disaster, is our Utopia interrupted, usually by some natural disaster.
Approximately 670 million people in India got to experience this first hand this week. It was an utter collapse of the electrical grid in 12 states around the continent. Mostly affecting the Northern and Eastern parts of India. Or said another way, 2 America’s worth of people are being told to expect to have no electrical service indefinitely. Government agencies use the terminology “indefinite delay” to relay to pilots that the real time frame for return to normal service is unknown. Last thing you would want to do is make 670 million people even more frustrated and angry than they already are.
“GREAT,” you say, “but my power in America is just fine and why the hell should I care about a bunch of Indians anyway? Furthermore, I’m a greedy capitalist pig and my bleeding heart never made me a dime.” While those things may or may not be true for you personally, long term trends are truly your friend when it comes to properly allocating your (hopefully) hard won capital.
To the point, commodities in general have the largest tail wind now than ever before. World population is exploding along with the economic growth that has taken place in BRIC countries over the last 10 years. The United States’ dollar, the world’s reserve currency, is being printed into oblivion. The work of the productive is being outright stolen and nationalized by governments all over the world. Copper companies and mines in South America (a lot of silver by-product also) and oil companies in Spain and Brazil (YPF and Petrobras) are currently dealing with this fraudulent behavior.
The raw materials that these projects will demand to see completed are larger than anything the raw materials producers of the world have ever seen before. How will they complete the task of bringing ever larger and larger amounts of copper, silver, and oil to market in the face of the ever greater governmental regulation? It will require gargantuan sums of Capex money to be spent, to locate new reserves and then transport them sometimes thousands of miles away to market.
Credit market conditions are even worse today than they were in 2008. This is not subject to debate, but a statement of fact. In other words. unless your name is BHP Billiton or Exxon Mobil you may find that your financing request gets the Bear Stearns treatment.
Some opportunities will be greater than others, of course. While 670 million sit in the dark “indefinitely”, I’ll take heart in knowing that silver is a huge and irreplaceable part of that energy problem, with many more problems like it to come in the future.