The Decade’s Best National Currency

GoldMoney Alert – 25 January 2010

In my last alert I presented two tables that showed the appreciation of gold and silver against nine of the world’s major currencies. A number of readers have asked me to provide these calculations for more currencies.

Most readers had the same objective. They wanted to know which of the various national currencies of the world ranks as the best one. In other words, they wanted to know which of them lost the least amount of purchasing power when using gold as the numéraire. Gold is an excellent ‘measuring stick’, but I also did the calculations for silver. The rates of appreciation of gold and silver in terms of 23 world currencies from 2000-to-2009 are presented in the tables below.

The best currency compared to gold is the Swiss franc, but even this venerable national currency lost 10.1% per annum on average for the past ten years.

The best currency compared to silver is a tie between the New Zealand dollar and Australian dollar. They lost 9.5% per annum on average for the past ten years.

So what really is the world’s best currency in terms of preserving purchasing power? It is gold, and silver is a close second. When viewed in terms of the above tables, no national currency even comes close. This conclusion is also confirmed by the following chart which presents a base-100 analysis of crude oil prices against three national currencies and the precious metals.

Both gold and silver purchase essentially the same amount of crude oil they did at the beginning of this decade. In fact, an ounce of gold or silver purchases basically the same amount of crude oil that they did at any time during the past 60-year time span presented in the above chart. The precious metals have a proven track record of preserving purchasing power.
Published by GoldMoney
Copyright © 2010. All rights reserved.
Edited by James Turk

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Ron Paul’s 2010 State of the Republic Address


As we start the new year 2010, the establishment politicians, economists and Wall Street are trying to convince themselves that we have turned the corner and economic growth has once again begun. The predictions that conditions are getting back to normal come from those who never saw the crisis coming and don’t have the vaguest notion what caused it. Some of them concede that it could be a jobless recovery. That will establish a new definition for a recovery.

Official unemployment is at 10% but even the government knows that if everyone is counted, including those individuals that are too discouraged to even be looking for work, the unemployment rate is 17%. Free-market economists claim the actual unemployment rate is closer to 22%.

There’s reason to believe that the correction is just barely started and has a long way to run. If the financial bubble came from excess credit created by the Federal Reserve, doubling the money supply can hardly be a solution. It wouldn’t make much sense for a doctor taking care of a very sick patient from severe infection to deliberately give the patient another infection. Yet that’s what the PhD doctors are doing to our very sick economy. It can’t work. It will make the economy much sicker. If our leaders don’t wake up soon, the economy will be brought to its knees. Great danger lies ahead.

In foreign policy, it’s always crucial that the motives of those who would do us harm are understood. Denial of the truth and accepting more politically palatable excuses will guarantee that threats to our safety will continue as we pursue a seriously flawed involvement overseas.

It’s the same in economic policy. If there’s denial or ignorance of the real cause of financial bubbles and the inevitable corrections that must follow, the economy cannot be reenergized.

We should have learned the lesson from the Depression of the 1930s that it was a predictable result from the Federal Reserve’s orchestrated excesses of the 1920s. Instead, the new-born Keynesian economists who took charge made certain that the correction would not be a one or two year affair as were the previous corrections in our history. The aggressive intervention by Hoover and Roosevelt, the Republicans and the Democrats, turned a short recession into the Great Depression, which lasted until the end of World War II.

The real tragedy was that the interpretation of the 1930s institutionalized bad economic theories. Unfortunately, and erroneously, the Depression was blamed on the gold standard, free markets and a lack of regulations. Though monetary policy was analyzed, its importance was 100% misinterpreted. The low interest rates and excess credit of the 1920s, driven by Federal Reserve policy, was not considered a factor in producing the stock market bubble and the mal-investment.

Instead, the 1930s analysts and even later analysis by Milton Freidman and the monetarists, along with academic “scholars” like Bernanke, came to an opposite conclusion: the Fed was at fault but only because it was too tight, arguing that massive monetary inflation was the only answer to the slumping economy.

And now we are witnessing a grand experiment by the very person who for years claimed special knowledge regarding the Depression. Chairman Bernanke is in the midst of trying to solve the problem of massive monetary inflation and excessively low interest rates instituted by his predecessor, Alan Greenspan, by implementing even more inflation at historic rates. The sad part is the answer to his very risky experiment with the wealth of our country and the health of our economy will take years to analyze. The conclusions will be just as flawed as they were in the aftermath of the Great Depression by an intellectual and political community that had totally rejected commodity money and the principle of free market with the current understanding in Washington.

One hope, though, is that free-market thinking and Austrian economic theories will have greater influence in the next decade or two, since their influence is now on a dramatic upswing. But there are a lot of hurdles to overcome.

In the 1930s, in an effort to find the true cause of the crisis, Congress ordered an official investigation. It became known as the “Pecora Investigation” named after Ferdinand Pecora, the aggressive chief council of the hearings. It received a lot of public attention and brought about many major changes but, tragically, every conclusion made and new policies implemented caused the depression to worsen and legitimized bad economic theories that continue to haunt us to this day.

The Federal Reserve was not blamed except for not printing enough money fast enough. Artificially low interest rates and mal-investment, the main source of the grossly distorted economy and bubble of the 1920s, were exonerated. Not enough regulations were blamed, thus the Glass-Stiegall Act and the Securities Act of 1933 were passed and deepened the depression. Separating commercial and investment banking and the newly created SEC were to have solved all future problems-as long as the Fed was free from any restraint in its money creation operation to serve big-government spenders and members of the banking cartel.

Since the flaws in the monetary and economic system were not corrected but made worse after the Depression, it was to be expected that periodic booms and busts would persist. The longer these cycles could be papered over with new money and credit, the greater would be the distortions and debt that would one day have to undergo a major correction.

That correction is now in its early stages. Since the dollar was the reserve currency of the world and totally fiat since 1971, without any linkage to gold, the financial bubble became worldwide. This bubble that burst in 2008 was the largest in history. During the formation of the bubble, the U.S. as the issuer of the world currency received undeserved benefits. We essentially became the counterfeiter of the world and no one called us on it. Even today, the trust in the dollar that persists has buffeted the pain of the correction for us. This unique setup was a prime cause for our balance of payment deficits and the huge foreign debt we owe-the largest in the history of the world. The discord in the world financial system is telling us that it’s time for us to pay for our profligate spending and massive foreign indebtedness. We have lived, as a nation, far beyond our means and the message is, for the foreseeable future, that we will be forced to live beneath our means as this debt is paid.

The inflation optimists are excited about current signs of economic growth and have even announced the end of the recession. It is conceivable that a reprieve can be achieved and the penalty that our economy must endure delayed. A reprieve must not be confused with a pardon; one is a temporary delay, the other an exemption. The payback for our excesses is certain to come.

Massively increasing debt and monetary inflation can slow the crash and change some government statistics encouraging the optimists. But real job growth and return of prosperity will remain elusive. The odds of us once again becoming an exporter of manufactured goods, like steel, cars, and textiles, are remote.

Ironically, a reprieve may well restore some confidence and motivate some spending and investment. But instead of restoring long-term growth, it may well act perversely by precipitating price inflation and higher interest rates. Since today’s interest rates are artificially set, much of our investing is unproductively misdirected.

Current enthusiasm in the stock market is once again a reflection of the message that low interest rates send. Thus too, the government’s stimulus package has helped to sustain the bond bubble, which in time must be deflated in order to get back to sound economic growth. All of this activity poses a threat to the dollar.

Governments are very powerful, and when in partnership with the monetary authorities that can inflate the currency at will, big government thrives. Welfare demands and senseless wars can be financed for long period of time through inflation, as long as trust in the currency lasts. Trust, though ultimately controlled by facts, can be misleading, since currency values can gain benefit from a country that has a strong military and wealth and a reasonably healthy economy. Eventually, markets and reality overwhelm, and illusions about a currency’s worth become a reality.

Today, reality is setting in and the first of three major events has begun. The worldwide financial system, built on a foundation of paper, has received the shock waves of an impending collapse.

The wild speculation and the derivatives market, the stock market bubble, the insurmountable debt-public and private-and the massive mal-investments have been shattered.

The only solution so far offered worldwide, but led by the United States, has been to “print money” faster, keep interest rates low at practically zero percent, and remove all stops for controlling deficits. These are the very policies that caused the disequilibrium, and doing more of the same, but only faster, can hardly help our economy. The addiction to easy credit and deficit defies a wise political solution. Politicians are incapable of delivering the message of frugality, common sense, and sound money.

We can expect that the course we are on to continue and accelerate, since the first event, the collapse of the financial system, is still in its early stage.
The housing crisis is far from over; the commercial property crisis has not yet gotten much attention, and the financial obligations of the government are growing exponentially. And none of this forces the slightest pause in the expanding of welfare growth. The number of regulations, which are indeed a tax, are exploding though the market was already suffering from regulatory excesses. There’s a consensus in Washington that “wise” regulations can compensate for all the mistakes made by the Federal Reserve, the Executive Branch, and Congress. This fallacy has been around a long time and will be difficult to overcome.

The pessimism of the middle class continues to get worse despite the prognostication of Wall Street and the Administration. Most Americans know that the standard of living and real wages have not gone up for the past 10 years. If you’re not a shrewd stock trader and instead invested in stocks 10 years ago and held on, in real terms you would have lost 20% of your savings.

The middle class is poorer also because house prices have crashed and many have lost their homes. On top of this, all we hear about is the trillions of dollars of debt and entitlement obligations that have been racked up for future taxpayers to pay. When it is revealed that the insider friends of the Fed and Congress get billions of dollars in bailout at the expense of the middle class, it’s no wonder the people are taking to the streets and directing their hostilities toward both Republicans and Democrats in Washington. Many would agree it’s well-earned anger and properly directed.

This anger and frustration will certainly grow as the consequences of the collapse of the financial system become more severe. The concerted effort to prevent the correction the market demands, guarantees a prolonged agonizing crisis. Every effort to reverse the tide will depend on spending, higher deficits, increased taxes and money creation. This effort is now providing another grand bubble: the dollar/bond bubble.

The next event will be a dollar crisis. A full-blown dollar crisis will be worse than our current financial crisis. The extent of a dollar crisis depends on whether or not the Washington politicians wake up and change their ways-a dubious hope.
More likely, the insanity will continue until some not yet known event will undermine the confidence of the dollar worldwide. Signs of less desire by foreigners to hold our dollars are already present. I’m certain our Treasury and Federal Reserve are pulling out all stops to prevent a massive run on the dollar.

At present the “orderly” retreat from the dollar is working. But it won’t last.
China is quite active in investing in natural resources around the world, and including in Iran. While we live in the dark ages and believe only our military presence and military threats can protect our access to oil, China is actually spending some of their savings investing in their future access to energy and other precious metals and minerals.

But the orderly retreat from the dollar won’t last forever. Since 1973, shortly after the breakdown of the Bretton Woods Agreement, the dollar has lost 32% of its value against a Federal Reserve basket of currencies. But that doesn’t tell the real story, since that is a measurement against all other currencies, and they are fiat currencies as well. This gave the dollar an artificial benefit from its position of power in great wealth and military prowess. The dollar in relationship to gold, however, is down 97% since 1971, and 82% as measured by the CPI. The dollar, mismanaged by the Fed, has not been a benefit to the savers who sought to responsibly take care of themselves. They’ve been cheated by a rotten system and are just beginning to understand exactly how the Federal Reserve has been responsible for the swindle.

It is impossible to predict the time when confidence will be lost, but it can come quickly. Resorting to buying other paper currencies will not be of much help. When the dollar crashes, most likely the purchasing power of all currencies-since all countries hold dollars as a reserve-will go down as well.
This means that dollars and other currencies will go into buying consumer items, precious metals and other physical properties. Consumer prices will soar, as well as interest rates. The central bank will lose control; and the more they inflate, the worse the confidence becomes. The interest rates will respond to these efforts by rising sharply.

If the Fed tries to reverse the run on the dollar, interest rates will also soar, and the pain on the American citizens will be of such proportion that political chaos will result. Either scenario leads to political and social chaos-the third event, and the most dangerous.

With no ability of the federal government to fund its commitments, international or domestic, major changes will occur in our system. The social unrest will elicit cries for government to exert unusual force to head off a complete breakdown of law and order. The ultimate trap will be set for a system of government claiming to protect a free society. If more power and police authority are not given to the federal government, it will be argued that only anarchy will result.

If more government policing power is given, it will mean a lethal threat to civil liberties. Already we have permitted the notion that a single person, the Attorney General or President, can decide who is an “enemy combatant”, thus denying that individual the right to habeas corpus, permitting indefinite detentions without charges made. This attitude toward civil liberties has changed significantly since the fear built around 9/11.

Yes, I know declaring one an “enemy combatant” is reserved for the radical Muslims engaged in terrorism against the United States. To be reassured by this reasoning is quite dangerous and naïve. Logic should not lead us to equate suspects with terrorists, and include American citizens, and yet this has already been set by precedent. Under difficult circumstances, our political leaders will not be hesitant to use these powers to maintain order. Tragically, the people may even demand it.

We are rapidly moving toward a dangerous time in our history. Society as we know it is vulnerable to political and social chaos.

This impending crisis comes as a consequence of our flawed foreign and domestic economic policies, a silly notion about money, ignorance about Central Banking, ignoring the onerous power and mischief of our out-of-control intelligence agencies, our unsustainable welfare state, and a willingness to sacrifice privacy and civil liberties in an attempt to achieve safety and security from an inept government. Dangerous times indeed!

What can be done about it? Must we wait for the inevitable and expect to restore our liberties in a street fight against the overwhelming power of the state? Not a good option!

The only way that we can prevent blood from running in the streets is to offer a better idea of the proper role of government in a society that desires first and foremost -liberty.

And that is impossible without a firm commitment by our thought leaders to the ideas of freedom, the source of all creative energy and prosperity. An all-powerful state is the threat to that ideal.

The prevailing attitude of the people-as it once was in early America-must be that of liberty and self reliance, rather than the nanny state and dependency relying on government force to mold all private choices.

If this is understood, a smooth-although not painless-transition to a free society is achievable. Ignoring this option will be very destructive to everything that is dear to the hearts of most Americans.

What is it that we must do? We must immediately embark on:

• Balance the budget by reducing spending
• Change our foreign policy to that of non-intervention
• A full audit and more supervision of the Federal Reserve leading to abolishing the Federal Reserve
• Legalize competition to the Federal Reserve with competing currencies
• Regain respect for civil liberties and privacy while reigning in the CIA
• Wean ourselves off the dependence of wealth transfers by government
• Abolish crony capitalism-no subsidies, no bailouts, no regulatory or tax privileges to protect the powerful elite, especially the military industrial complex
• Eliminate the income tax, inheritance tax and taxes on savings and dividends.

None of this can happen without the restoration of Congress to its dominant position of the three Branches of Government as was originally intended by the Constitution. The Executive and Judicial must be reined in, and Congress must assert its prerogatives over all legislation curtailing all unconstitutional agendae through budgetary controls.

Signs abound that angry Americans are now more ready than ever before for a change in direction that is indeed real. If this program were improvised-even suddenly and dramatically-the adjustment, though significant and to a degree somewhat painful, would be much shorter and of minor consequence compared to the chaos and poverty that will result if we refuse to change our gluttonous appetite for a free lunch.

Mosquito Consolidated and WorldÂ’s Biggest Molybdenum Mine

By James West
Tuesday, January 19, 2010

Mosquito Consolidated (TSX:MSQ) CEO Brian McClay has been watching the price of Molybdenum with patient satisfaction. The reason is obvious: Mosquito Consolidated Gold Mines happens to the 100% owner of the world’s largest, as-yet-undeveloped molybdenum deposit on earth. The share price doubled when our coverage began, and so it is with no small satisfaction of our own that we continue to delve into the future of this elephantine opportunity. We’ve chosen Mosquito Consolidated as one of our top picks of the year.

Why? Simply because of its sheer size, and the increasing interest of investors who have the financial resources to build the substantial infrastructure required to extract the mineral value from this deposit. Many readers, and many investment bankers, fall prey to the same cliché; “too good to be true”.
The disconnect reported by many of subscribers is a common occurrence in the mining industry.

“If the deposit is worth more than US$30 billion, and the company only has 60 million shares outstanding, then why is trading at only $1.50?”

The answer to that is a little complicated, but also very simple at the same time. A project that is going to take US$2 -3 billion to put into production is very sensitive to market conditions. We’ve just witnessed the price of Moly fall straight out of bed along with other industrial metals as a result of the global economic slump.

But that all is changing, for the moment. The enthusiasm with which G7 governments are printing money has resulted in demand for investment assets, which in turn drives the prices of commodities higher, which itself acts to stimulate economic growth through the capital freed up in profits through trade.

Copper has seen a steady recovery, and now seems headed back towards record territory. Chinese growth was only slowed slightly by the whole crisis, in the health of the Chinese economy has seen demand for everything including molybdenum return to growth. In fact, predictions all seem to favor much higher metals prices in the next decade.

So as long as there’s economic uncertainty in the air, major institutional investors don’t feel compelled to take huge positions in something as yet on paper, but their reticence is exactly the opportunity for the risk tolerant investor. The “too good to be true” mentality has been proven wrong before, especially in the mining business. (Carlin, Yanacocha, Voisey’s Bay, Oyu Tolgoi…but I’ll stop there.)

In the case of the CUMO deposit, the numbers are very real, as the company that did the study will attest.

Fortunately, the Preliminary Economic Assessment (PEA) is using rather conservative pricing scenarios to determine the value of the project.

Preliminary Economic Assessment

Based on a pre-tax financial model (earnings before interest, tax, depreciation and amortization) and using a long-term, base-metal price scenario, Ausenco’s study showed the CUMO project having a Net Present Value (NPV) of US$16 Billion for a 150,000 short tons per day ore production rate and US$10 Billion for a 100,000 short tons per day ore production rate.

Corresponding Internal Rates of Return (IRR) were 36% and 29% respectively — significantly above the minimum 12.5% to 15% IRR typically required for United States-based projects to be considered for production — and straight-line payback periods for start-up capital costs were 2.3 and 3.0 years respectively. These very substantial figures indicate that Mosquito should be developing CUMO toward an initial ore production rate of between 100,000 and 150,000 short tons per day.

The base case economic analysis uses the estimates of capital and operating costs and assumptions as listed in the table below indicates that, given the current estimated mining and plant operating costs, as well as capital cost estimates, the internal rate of return (%IRR), Net Present Value at 5% discount rate (NPV5), payback period (years), discounted payback period at 5% and operating costs per pound of molybdenum oxide are as shown below. All values are calculated based on Earnings Before Interest Tax Depreciation and Amortisation (EBITD&A).

A quarter-century into its mine building life, Mosquito Consolidated has reached world-class status, with tangible multi-billion-dollar resource assets, some of the highest NI 43-101 compliant drill results ever achieved for the company, long mine-life resources, blue chip partnerships, and an excellent management team.

Recent Drilling Continues to Expand the Deposit

In November last year, Mosquito announced assay results that demonstrated the continuing exploration upside of the CUMO deposit, with the discovery of a new copper zone.

The following is from the press release dated November 12, 2009: Hole 49-09 is a vertical hole (-90) drilled to a depth of 867.8 meters (2847 feet),from a site located in the southeast corner between holes 14-77 and 44-08. The hole is designed to extend the mineralized zone intersected in Hole 14-77 (409.6m (1343.8 feet) grading 1.36% Cu Equiv/0.12% Molybdenite equiv.) to the south (figure 1) toward hole 44-08 (low grade hole).

Hole 49-09 intersected molybdenum bearing mineralization from 64.0 (210 feet) to 867.8m (2847) feet. The hole confirms that the molybdenum mineralization is present at depth and fills in a large gap between hole 14-77 and hole 44-08 in the mineral resource.

Assay results returned include:

Hole 48-09 is an angle hole (-70) drilled to a depth of 785.2 meters (2576 feet), bearing 305 degrees azimuth from the same site as Hole 47-09 (598.6m (1123.5 feet) 0.89% Cu Equiv.). The hole is designed to extend the mineralized zone intersected in Hole 47-09 to the north (figure 1). Hole 48-09 intersected molybdenum bearing mineralization from 88.4m (290 feet) to 640.1m (2100 feet). The hole intersected mineralization very similar to Hole 47, with a slight decrease in Molybdenum mineralization. This further confirms the presence of the newly outlined older Copper porphyry System and that the main molybdenum zone continues to the south and west rather than the north. It should be noted that this area was considered waste in the recently announced Preliminary Economic Assessment (see news release dated October 7, 2009).
Assay results returned include:

Geologically, the hole 49-09 confirms the continuation of the main higher grade core to the south and east. Hole 44-08 located to the south drilled over the top of the molybdenum zone, which is beyond the depths of the preliminary open pit design, and indicates the potential for underground accessible mineralization beneath the current pit designs. Hole 52-09 is currently drilling at 2770 feet to further expand information in this area (figure 1).

Hole 48-09 is the second hole drilled into the older, porphyry copper-silver system, which has been cross cut by the younger molybdenum bearing veins. The overall grade is slightly lower than Hole 47-09, due to the drop in molybdenum bearing mineralization. In addition, hole 48-09 intersected the same fault zone as 47-09 at 1736.5 feet. Only weak mineralization was intersected below this fault, indicating the mineralized zone is offset to the south west. Hole 53-09 is currently drilling to fill-in a large gap between hole 47-09 and hole 41-08, to complete this western most fence of holes. Future drilling will continue to follow the mineralization to the west and south west.

When the Newsletter Writers Start Coverage, Things Are About to Change

Newsletter writers don’t like to write about moose pastures or flogged out mineral assets that have more drill holes than swiss cheese. No..we like to cover things that are going to make us look SMART. So that’s why we are happy to see Bob Moriarty of also covering Mosquito. Bob’s picked many winners over the years, and he makes no bones about his thoughts on the CUMO deposit:

“The company has drilled out a 43-101 resource of about 2.9 billion tons. That is monster. The value of all the contained metal is about $78 billion dollars using today’s prices. There is moly, copper, silver, tungsten and an unusual element called rhenium. Voisey’s Bay only contains $38 billion dollars worth of nickel at today’s price. When you want to compare Mosquito, think Voisey’s Bay and double it.

I don’t doubt for a moment that there are naysayers who would be quick to point out that minerals in the ground don’t represent real value because you don’t mine them all and you don’t recover them all. That’s perfect true. And perfectly meaningless at the same time.

But for the sake of argument, I went to Shaun Dykes, Exploration Manager for Mosquito. He worked up a similar spreadsheet for me showing the gross metal value on a recovered basis. It’s still $66.9 billion. Wow.”

But its not just newsletter writers…highly respected industry journal The Northern Miner saw fit to cover the company last year too:

The project, 15 km southwest of Idaho City, is undoubtedly large. The scoping study considers the economics of the Cumo project at four mining rates between 45,000 tonnes per day and 181,000 tonnes per day, projecting initial capital costs in the range of US$1.6 billion to US$3.4 billion.

Mosquito puts the focus squarely on evaluating the project at mid-sized mining rates. In a 91,000-tonne-perday scenario Mosquito pegs start-up costs at US$2.2 billion. With a 40-year mine life Cumo returns a net present value (NPV) of US$10 billion and an internal rate of return (IRR) of 29%.

A larger, 136,000-tonne-per-day mine, would give somewhat better economics. At that mining rate the project, which would initially cost US$2.8 billion to build, got a US$16 billion NPV and a 36% IRR.Payback in the latter two scenarios, based on US$16-per-lb moly oxide, US$2.10-per-lb. copper, US$12-per-oz. silver, US$6-per-gram rhenium and US$148-per-tonne sulphuric acid, would respectively come after 2.3 and 3 years of mining.

In all scenarios the bulk of capital costs are accounted for by the price of building a mill – respectively US$1 billion and US$1.5 billion at the 91,000-tonne-per-day and 136,000-tonne-per-day mining rates – and the cost of pre-stripping development. In the respectively lower and higher mining rate scenarios Mosquito estimates pre-stripping costs at US$700 million and US$640 million.

The scoping study pegs cash costs per lb. moly oxide at an attractive price point: US$3.90 at the 91,000-tonne-per-day mining rate and US$4.30 at the 136,000-tonne-per-day mining rate. The scoping study treats 598 million tonnes of Cumo’s indicated resource grading 0.11% moly oxide and 0.06% copper as ore.

Mosquito exploration manager Shaun Dykes says he has been getting essentially two questions from individuals who have taken a look at the project: “US$2.2 billion. Where are you going to get that? And then, can you get it permitted?”

Permitting, Financing, Construction

Good questions, to be sure, but when the Chinese are involved, numbers like billions don’t seem all that frightening. What we’re likely to see is the incremental growth in capital resources of the company as various financings are completed over time from numerous sources, thereby diversifying the risk.
In terms of permitting, the refusal of permits tends to be either environmental (especially in consideration of groundwater contamination) or political. In the case of CUMO, the state of Idaho is not exactly swimming in cash, and so the political pressure will more likely favour the permitting of the project, as long as the environmental considerations can be satisfactorily addressed.

Make no mistake: this project is just too big and profitable to be left sitting on the sidelines for much longer. Its not a question of “if” this project will be permitted, financed and built. Its just a question of “when”.

Follow the company’s progress online at Mosquito Consolidated Gold Mines Limited – Home Page – Tue Jan 19, 2010.

US Debt: Look At It This Way

by Adrian Ash
Friday, 15 January 2009

Seven ways to put the United States’ national debt into perspective…

The SHEER SIZE of the US government’s debt hasn’t put off new bond buyers so far in 2010.

You’ve got to wonder what kind of news – or debt – it might take to deter them.

In just two days this week, the Treasury issued $61 billion in new debt – twice as much money as Japanese households put into their domestic equity funds during all of 2009, itself a 50% jump from 2008.

Yet one “big bidder” still opted to lend the federal government one fifth of that sum, according to bond analysts speaking to the Financial Times at least. And overall, the government’s creditors offered to lend Washington three times the money it sought.

Now, if the Treasury didn’t need that $61,000,000,000 to cover 6.3 days of spending, the money raised in new bonds between Tuesday and Wednesday this week could cover 12 days of interest due on the outstanding debt, already running above $12.3 trillion and outweighing the market value of every company listed on the New York Stock Exchange.

Put another way, the United States national debt is greater than the GDP forecast this year for Japan, China, Brazil and Canada added together. (That’s excluding the $107 trillion of unfunded liabilities yet to come, of course.) If today’s lenders ever see their money again, they could just about buy all the gold ever mined in history – all 165,500 tonnes of the stuff – twice over at today’s prices.

Or they could simply pay twice today’s gold price, of course.

Repaying the US national debt looks a struggle, however. Settling $1 per second – rather than racking up an extra $37,132 every second, as the federal government’s scheduled to do in 2010 – would take until the start of February A.D. 392,372. Settled for cash, and piled up in $1 bills, the current US debt would reach to the moon…and back…and back to the moon again…and then round the moon’s equator ten or perhaps 20 times, depending on how much you squashed them.

Or to put the US national debt into historical perspective – a very historical perspective – the US government has borrowed the equivalent of $2.46 each and every day since the beginning of time…last computed to have occurred some 12.7 billion years ago, back when $2.46 really meant something.

For creationists sticking with Archbishop Ussher, that’s $2 billion per year since God said “Let there be light”…back when fiat really meant something, too.

And lo! The bond market still kept on buying.

Adrian Ash

Gold price chart, no delay | Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Gold and Other Metals Set to Go Higher: TECHNICAL VIDEO

What is the best harbinger of inflation? Let’s say it together: GOLD.

Prices are going higher, and metals are going to shine…

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Paco Ahlgren

Disclosures: Paco is long TBT, UCO, and gold. He also holds U.S. dollars by necessity, pending the advent of private gold-backed currencies. Paco has been a financial analyst and a portfolio manager for 18 years. You can buy his novel Discipline wherever books are sold. Or visit

Copyright 2010, Paco Ahlgren. All Rights Reserved.

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Michael Crichton’s Speech On Complexity Theory and Environmental Management

Regarding the foolishness of simple thinking (especially from government)… I don’t think there is any better read than this speech on complexity by Michael Crichton.

In the speech he goes into detail on the absurdity of misinformed-people-with-agendas, the enormous swirls of fear they create, and the disastrous consequences of “linear thinking”.

In a complex world, you cannot reduce complex problems down to simple solutions. Sadly, this is not very apparent to most in the west, especially those do-gooders in Washington.

Read it here.

… It was his third visit. Roosevelt saw a thousand antelope, plentiful cougar, mountain sheep, deer, coyote, and many thousands of elk. He wrote, “Our people should see to it that this rich heritage is preserved for their children and their children’s children forever, with its majestic beauty all unmarred.”

But Yellowstone was not preserved. On the contrary, it was altered beyond repair in a matter of years. By 1934, the park service acknowledged that “white-tailed deer, cougar, lynx, wolf, and possibly wolverine and fisher are gone from the Yellowstone.”

What they didn’t say was that the park service was solely responsible for the disappearances. Park rangers had been shooting animals for decades, even though that was illegal under the Lacey Act of 1894. But they thought they knew better. They thought their environmental concerns trumped any mere law.

What actually happened at Yellowstone is a cascade of ego and error. But to understand it, we have to go back to the 1890s. Back then it was believed that elk were becoming extinct, and so these animals were fed and encouraged. Over the next few years the numbers of elk in the park exploded. Roosevelt had seen a few thousand animals, and noted they were more numerous than on his last visit.

By 1912, there were 30,000. By 1914, 35,000. Things were going very well. Rainbow trout had also been introduced, and though they crowded out the native cutthroats, nobody really worried. Fishing was great. And bears were increasing in numbers, and moose, and bison.

By 1915, Roosevelt realized the elk had become a problem, and urged “scientific management.” His advice was ignored. Instead, the park service did everything it could to increase their numbers.

The results were predictable.

Antelope and deer began to decline, overgrazing changed the flora, aspen and willows were being eaten heavily and did not regenerate. In an effort to stem the loss of animals, the park rangers began to kill predators, which they did without public knowledge.

They eliminated the wolf and cougar and were well on their way to getting rid of the coyote. Then a national scandal broke out; studies showed that it wasn’t predators that were killing the other animals. It was overgrazing from too many elk. The management policy of killing predators had only made things worse.

Meanwhile the environment continued to change. Aspen trees, once plentiful in the park, where virtually destroyed by the enormous herds of hungry elk.

With the aspen gone, the beaver had no trees to make dams, so they disappeared. Beaver were essential to the water management of the park; without dams, the meadows dried hard in summer, and still more animals vanished. Situation worsened. It became increasingly inconvenient that all the predators had been killed off by 1930. So in the 1960s, there was a sigh of relief when new sightings by rangers suggested that wolves were returning….

And by now we are about ready to reap the rewards of our forty-year policy of fire suppression, Smokey the Bear, all that. The Indians used to burn forest regularly, and lightning causes natural fires every summer. But when these fires are suppressed, the branches that drop to cover the ground make conditions for a very hot, low fire that sterilizes the soil. And in 1988, Yellowstone burned. All in all, 1.2 million acres were scorched, and 800,000 acres, one third of the park, burned.

Then, having killed the wolves, and having tried to sneak them back in, the park service officially brought the wolves back, and the local ranchers screamed. And on, and on.

As the story unfolds, it becomes impossible to overlook the cold truth that when it comes to managing 2.2 million acres of wilderness, nobody since the Indians has had the faintest idea how to do it. And nobody asked the Indians, because the Indians managed the land very intrusively. The Indians started fires, burned trees and grasses, hunted the large animals, elk and moose, to the edge of extinction. White men refused to follow that practice, and made things worse.

Here’s a modern chart, from a sustainability website. It shows the relationships of pretty much everything: lithosphere, biosphere, market, community, customers. Who makes a chart like this? Who thinks the world operates this way?

Because look. It does not explain the world.

In fact, the chart on the right, showing everything, is absurdly simple. Nothing in nature is so simple.