by Scott Causey, GWP Resource Correspondent

oilRecently, I sent a link to about a dozen friends, of a 45 minute interview conducted by a world renowned pschycologist with the infamous “Iceman”. The Iceman was a contract killer for the Mafia for over 30 years. He earned the nickname because he would sometimes store his victims in industrial freezers before dismembering and disposing of the bodies. During the course of the interview, the Iceman detailed with intricate detail the torture and murder of his victims. In one instance he allowed one of his victims to pray for 30 minutes. The Iceman told the gentlemen that if God showed up, he wouldn’t kill him. After 30 minutes, he shot him in the head.

The feedback I received from my friends after viewing this video was across the board. One stated that he could not eat dinner that evening after viewing it. Another told me that he had trouble sleeping for about a week. Several others could not bring themselves to watch the entire interview. Almost universally, people do not want to know the truth if it is too disturbing to them. They would rather go about their day to day and assume or choose to openly deny even the mere possibility that evil does indeed walk among us. It always has and it always will.

The days when the masses can continue to turn their heads and ignore the financial facts staring them directly in the eye are distant in the rear view mirror now. Average national gasoline prices are now at an all-time record. Hurricane Isaac surely will not help this at all. A few quick stats as the oil industry prepares for the storm-


Brent crude briefly traded above $115 dollars a barrel before retreating on SPR release rumors from the United States government. Speaking of governments, China’s economy has been slowing for months. Today they announced 8 trillion yuan (1.2T USD) of stimulus for “core projects”. What has recent history shown in the last 5 years that China views as a core project? Stockpiling commodities of all stripes with a particular emphasis on oil and precious metals. Additionally, they are spending hundreds of billions of dollars to buy up resources still in the ground. In the last 2 years, China has invested over 100 billion dollars on the continent of Africa alone for a myriad of commodity projects.

In a world where a trade on Wall Street can be executed in 8 nanoseconds and a “long term investment” consists of holding a security for less than a year, many are seemingly still missing the bigger picture. Everywhere you look the signs of extreme stress in the global financial system manifest themselves more and more by the day.

Thirty years ago, economists would talk about “negative real interest rates”, meaning that the effective yield on a particular investment was below the rate of inflation. What a quaint memory!!  Germany sold 5 year Bunds last week with a yield of NEGATIVE .27%! Got that? People were so desperate for paper considered to be “safe” that they paid the German government for the privilege up front. These low and in many cases NEGATIVE interest rates have enormous implications for the multitude of financial institutions that rely on payouts from fixed income investments to pay upcoming obligations. These would include insurance companies, endowments, pension funds, etc.

By its very definition in the strictest sense of the word, a subsidy or stimulus in any form is admission of failure. For the life of me I cannot understand how people view it as anything else. If you have a son or daughter in there 40’s would you expect to still pay their car payment and cell phone bill? Of course not. But yet people in the world are continuing to extend and pretend that if just enough money can be created all will be well in the end. Money printing does not repeal the laws of financial physics in the long run.

To believe in a global economic recovery is to believe that the production of oil is increasing as well. Its as simple as that. Anyone that thinks economies can continue to expand while energy production remains flat or declines, seriously needs to take a trip back to Econ 101. Serious and ongoing damage has been inflicted on many of the most critical oil producing nations in the world in the last 24 months. These would include Iran, Syria, and Libya. Between the 3 countries you are talking in the neighborhood of 5 million barrels of crude oil production a day. For those without any sense of history, the oil price shocks of the late 1970’s were due to an overthrow of the Iranian government and a subsequent crash in oil production.

For further historical context, consider the January 11th, 1982 report by the Comptroller of the Currency for the United States. In this report to Congress, they stated that from 1939-1945 the United States consumed 411 million ounces of silver during WWII. Where did the United States obtain so much silver? From the Silver Repurchase Act of 1934, of course. During the heights of the Great Depression,  the United States’ government nationalized all silver mines and began buying vast quantities of silver on the open markets. A huge amount which came from China, which at the time up until 1935, had a silver backed currency. Congress directed that US government buy silver until the price reached $1.29 an ounce or until silver represented 1/3rd of foreign currency reserves. By the time WWII started, the United States’ government had stockpiled over 3 billion ounces of silver! Clearly at the height of the Great Depression, silver was viewed as critically important to industry and national defense. Yet by 1982, in the previous mentioned Comptroller report, it was recommended to Congress that the remaining 130 million ounces of silver left in the strategic stockpile be liquidated into the market because it was “unnecessary”. Quite the sea change in thinking no?

Could it be today that China has developed a sense of irony and “gasp” has a stronger understanding of history than what is taught in American schools? Is it a sign that Major Banks, Central Banks, and institutions such as the CME group accept gold as collateral? In the last 3 years, has growth exploded because of current policies? For the love of god, people, stop looking at 5 minute charts and interpreting volatility as risk. If the status quo was still in place, gold would not be valued where it is today. Stop thinking in nanosecond home flipping Nasdaq bubble terms and start looking at the silver low hanging fruit staring back at you in the face. The Iceman might not give you 30 minutes.