China buying up big pieces of Canadian natural resources

The Mad Hatter · Post by **The Mad Hatter** » Thu Oct 21, 2004 8:21 am

As seen here.

China set to buy up Canada's resources

Beijing — China's Communist rulers have a blunt message for anyone who frets about the planned Chinese takeover of Canada's biggest mining company: Get ready for more to come.

In an exclusive interview with The Globe and Mail in Beijing this week, Chinese Foreign Minister Li Zhaoxing made it plain that the controversial $7-billion takeover of Noranda Inc. is just a small element in a much more ambitious strategy of investment in Canada's resources sector to feed China's voracious appetite for raw materials.

"Given our rapid economic growth, we're facing an acute shortage of natural resources," the Foreign Minister told The Globe.

"No matter how plentiful our natural resources, when you divide them by our population of 1.3 billion, the figure will be very small," he said.

"The Chinese government is encouraging Chinese enterprises to make investments in Canada, particularly in the field of resources exploitation."

It is the first public comment on the Noranda issue by a senior Chinese leader since the controversy over the planned takeover erupted last month.

Though the minister did not identify any specific targets for future Chinese buyers, it is known that two of China's biggest state-controlled oil companies are considering major investments in Alberta's oil sands. In other potential billion-dollar deals, Chinese oil and mining companies are looking at lucrative assets held by Canadian companies in Ecuador and Mongolia.

The proposed takeover of Noranda by state-owned China Minmetals Corp. has shocked many Canadian observers, but it is a potent symbol of China's sudden emergence as a powerful global investor and a massive consumer of commodities. China is hungry for supplies and expertise in the natural resources sector, and Canada has both.

The Noranda takeover — which is expected to be finalized by mid-November, becoming the biggest overseas acquisition by a Chinese corporation — has sparked questions by several MPs who have raised human-rights concerns. Some say the deal should be blocked because of reports that China Minmetals has been linked to the use of forced labour in the Chinese prison gulag.

..."

LordMortis · Post by **LordMortis** » Thu Oct 21, 2004 8:43 am

[Best impersonation of Tim] I warned you. [/Best impersonation of Tim]

China and resources are about to become a huge issue and it is going to be an interesting rollercoaster ride that continues to destabilize economies and ecosystems all over the world. And just wait. India and Korea are soon to come as well. And don't think that it is China that is really the cause of this economic might. It is wealthy investors in the NYSE. China will simply be the ones to have government eat these investments for the good of their nation.

RunningMn9 · Post by **RunningMn9** » Thu Oct 21, 2004 11:03 am

Damn. They're already leasing crop land from neighboring countries because they can't make enough food. Now they are buying Canada's natural resources?

What happens when Canadians need them?

LawBeefaroni · Post by **LawBeefaroni** » Thu Oct 21, 2004 11:27 am

China is global superpower. They buy what they need, and take what they can't buy, just like any other superpower.

Economically, they are going to kick our asses in the next 5-10 years. Millitarily they probably could right now. Politically, who cares. Politics are for countries that can't throw around their economic or military weight.

Prepare for your Chinese overlords.

LordMortis · Post by **LordMortis** » Thu Oct 21, 2004 11:35 am

China is global superpower. They buy what they need, and take what they can't buy, just like any other superpower.

They aren't buying what they need. We are buying what they need. The taxes you pay that allow for corporate tax breaks and government aid to provide incentive to invest in the Chinese infrastructure is paving Chinese roads and building Chinese infrastructure and employing the Chinese populace and allowing them to produce the cheapest goods, that in turn get sold to us, putting more domestic businesses out of business. Stupid short sighted corporate (and personal) greed is gonna do a number on us. With any luck we just go quietly into the night like "old" Europe. We retire to a less competitive, older and wiser, nonchalant life. I don't think our voracious appititve for raw materials and finished goods will let that happen, though.

Dirt · Post by **Dirt** » Thu Oct 21, 2004 12:13 pm

RunningMn9 wrote:Damn. They're already leasing crop land from neighboring countries because they can't make enough food. Now they are buying Canada's natural resources?

What happens when Canadians need them?

More importantly, what happens when the USA needs them? Don't we get most of our timber from there?

Dirt · Post by **Dirt** » Thu Oct 21, 2004 12:15 pm

LawBeefaroni wrote:China is global superpower. They buy what they need, and take what they can't buy, just like any other superpower.

Economically, they are going to kick our asses in the next 5-10 years. Millitarily they probably could right now. Politically, who cares. Politics are for countries that can't throw around their economic or military weight.

Prepare for your Chinese overlords.

China is still a quasi-Superpower. They could win a battle against the USA if it's fought on their own land. But they'd lose a global war pretty quick.

LawBeefaroni · Post by **LawBeefaroni** » Thu Oct 21, 2004 12:35 pm

LordMortis wrote:
China is global superpower. They buy what they need, and take what they can't buy, just like any other superpower.
They aren't buying what they need. We are buying what they need. The taxes you pay that allow for corporate tax breaks and government aid to provide incentive to invest in the Chinese infrastructure is paving Chinese roads and building Chinese infrastructure and employing the Chinese populace and allowing them to produce the cheapest goods, that in turn get sold to us, putting more domestic businesses out of business. Stupid short sighted corporate (and personal) greed is gonna do a number on us. With any luck we just go quietly into the night like "old" Europe. We retire to a less competitive, older and wiser, nonchalant life. I don't think our voracious appititve for raw materials and finished goods will let that happen, though.

We buy it for them, they buy it themselves, same thing. You're right, it is short-sighted greed that is doing us in.

"I know Costco is killing local businesses, but damn if I can't get the cheapest TV there and pick up my groceries at the same time!"

"Production in China will reduce costs by 15% and get us a tax credit..."

"We can buy steel cheaper from China than from domestic suppliers and the funny thing is, the raw ore is from the US to begin with. Ha ha ha, want a cigar?"

Dirt wrote:China is still a quasi-Superpower. They could win a battle against the USA if it's fought on their own land. But they'd lose a global war pretty quick.

If MAD is losing a global war, yes. But then we've lost too. They have subs, they have nukes, and they have 1.3 billion bodies. The only immediate threat in their neighborhood is Korea and we do a good enough job of keeping that one deadlocked while continuing to commit troops to the Middle East. I wouldn't call them a threat, but they aren't quasi, they are legit.

[/u]

SuperHiro · Post by **SuperHiro** » Thu Oct 21, 2004 1:01 pm

I agree with Dirt. China isn't an all out superpower yet. It's close though.

I visited Beijing, Shanghai, and Guangzhou last year (three of the biggest cities in China). Good god. I only saw the sun ONCE, when visiting the Shaolin Temple in Henan. I was there for two weeks. And whoever was in charge of city planning should be shot. The roads are absolutely horrendus. A convoluted mess. And as we all probably know already, about 90% of the software there is completely pirated. It's capitialism at it's best and worst.

IMO, China is blitzing to hit US and Western Europe status as fast as it can, but it's leaving a lot of people behind (which is only natural I suppose). But the differences between Shanghai and a "normal" city in China is quite striking. The only time the government moves fast is when it's putting the hammer down on dissidents.

Eel Snave · Post by **Eel Snave** » Thu Oct 21, 2004 1:05 pm

Hasn't Warcraft taught us anything?

OMG USA RUSH!!11one!

LordMortis · Post by **LordMortis** » Thu Oct 21, 2004 1:17 pm

We buy it for them, they buy it themselves, same thing. You're right, it is short-sighted greed that is doing us in.

For me, it's not the same thing, if only because it's the products I choose the way I shop, and the politicians I put in office who take money out of my pocket that are aiding the undermining of our economy and the global enviornment. It'd be one thing if I were divorced from the process, but I am an unwilling tool being used to dismantle my own future and that pisses me off.

This should be the issue for the coming elections and I'd say George should be crucified over it, but then I have to remember that foriegn countries like Kerry best. He's about mortgaging the American populace for "a global" community as much as the next guy.

noun · Post by **noun** » Thu Oct 21, 2004 1:30 pm

A global Chinese empire to challenge and perhaps ultimately replace the American empire is all but imminent, certainly within our lifetime.

geezer · Post by **geezer** » Thu Oct 21, 2004 2:43 pm

Just wait till China calls in all the debt they've been buying from the US. Or more simply, just refuse to buy anymore bonds. China's got us by the short and curlies already, and our deficit (that "doesn't matter") is how they're doing it.

Anyone know what percentage of the US national debt is held by China?

Dirt · Post by **Dirt** » Thu Oct 21, 2004 2:48 pm

In today's news, 150 feared dead in China coal mine blast:

http://story.news.yahoo.com/news?tmpl=s ... mine_blast

Yog-Sothoth · Post by **Yog-Sothoth** » Thu Oct 21, 2004 4:26 pm

From http://www.chinadaily.com.cn/english/do ... 378317.htm

At the end of 2000, China's foreign exchange reserve was US$165.6 billion. By the end of 2002, it rocketed to US$286.4 billion before it soared to US$403.3 billion by the end of 2003. By the end of June this year, the reserve was registered at a staggering US$470.6 billion.

About two thirds of the reserve is dominated by the US dollar. As the dollar goes down, China will suffer great financial losses.

...

To ward off foreign exchange risks, China needs to readjust the current structure, increasing the proportion of the euro in its foreign exchange reserves.

Considering the improving Sino-Japanese trade relations, more Japanese yen may also become an option. During the January-June period this year, the proportion of China's trade volume with the United States, Japan and Europe to its total trade volume was 36.5 per cent, 28.6 per cent and 37.4 per cent respectively. Obviously, seen from the perspective of foreign trade relations, the US dollar makes up too large a proportion of China's foreign exchange reserves.

China could also encourage its enterprises to "go global" to weaken its dependence on US treasury bonds.

And using US assets to increase the strategic resource reserves, such as oil reserves, could be another alternative.

China has tons of dollars in reserve and is buying more in order to keep the renminbi from rising. They could stop buying dollars/bonds, but that will cause the dollar to fall, hurt China, and also could cause a devastating 'dislocation' in the financial markets.

Buying foreign resources is overall neutral to the dollar if the payment is made in US dollars. This gives China a safety valve which will give them some real assets for their dollars and allow them and us to put off the inevitable dollar devaluation for a while longer.

Since both the government and the public are spending beyond their means and the Fed is being super-cooperative it is only a matter of time before a major readjustment occurs. The net result will be a fall in the dollar, a rise in inflation, and real pain for the US. The only question is when it will happen and how quickly. The faster it happens the more economic damage will occur.

The longer we have, the more time we have to get our finances in order (don't count on the government to get their finances in order). I am planning to move as much of my assets into safe havens as possible in the next few months.

In short, this move by the Chinese is actually good for us personally if we take advantage of the extra time it buys us.

geezer · Post by **geezer** » Thu Oct 21, 2004 6:37 pm

Yog-Sothoth wrote:From http://www.chinadaily.com.cn/english/do ... 378317.htm

At the end of 2000, China's foreign exchange reserve was US$165.6 billion. By the end of 2002, it rocketed to US$286.4 billion before it soared to US$403.3 billion by the end of 2003. By the end of June this year, the reserve was registered at a staggering US$470.6 billion.

About two thirds of the reserve is dominated by the US dollar. As the dollar goes down, China will suffer great financial losses.

...

To ward off foreign exchange risks, China needs to readjust the current structure, increasing the proportion of the euro in its foreign exchange reserves.

Considering the improving Sino-Japanese trade relations, more Japanese yen may also become an option. During the January-June period this year, the proportion of China's trade volume with the United States, Japan and Europe to its total trade volume was 36.5 per cent, 28.6 per cent and 37.4 per cent respectively. Obviously, seen from the perspective of foreign trade relations, the US dollar makes up too large a proportion of China's foreign exchange reserves.

China could also encourage its enterprises to "go global" to weaken its dependence on US treasury bonds.

And using US assets to increase the strategic resource reserves, such as oil reserves, could be another alternative.
China has tons of dollars in reserve and is buying more in order to keep the renminbi from rising. They could stop buying dollars/bonds, but that will cause the dollar to fall, hurt China, and also could cause a devastating 'dislocation' in the financial markets.

Buying foreign resources is overall neutral to the dollar if the payment is made in US dollars. This gives China a safety valve which will give them some real assets for their dollars and allow them and us to put off the inevitable dollar devaluation for a while longer.

Since both the government and the public are spending beyond their means and the Fed is being super-cooperative it is only a matter of time before a major readjustment occurs. The net result will be a fall in the dollar, a rise in inflation, and real pain for the US. The only question is when it will happen and how quickly. The faster it happens the more economic damage will occur.

The longer we have, the more time we have to get our finances in order (don't count on the government to get their finances in order). I am planning to move as much of my assets into safe havens as possible in the next few months.

In short, this move by the Chinese is actually good for us personally if we take advantage of the extra time it buys us.

I've come to the exact same conclusion. Out of curiosity, what are you buying? foreign currency portfolios? Euros? Swiss Francs? Some sort of currency-neutral commodity?

Yog-Sothoth · Post by **Yog-Sothoth** » Thu Oct 21, 2004 7:31 pm

I have some physical gold and a fairly large stake in PSAFX. They have not done amazingly well since the drop in gold prices earlier this year (though they are coming back since gold is back up). I have a smaller stake in BEARX which I may expand as we seem to get closer to the edge.

I have a token Everbank account in Euros ready to be expanded when the time is right. Euros are the conservative choice, as they have already appreciated against the dollar. I may take a stake in Yen or Renminbi using some of the Everbank accounts, but this seems risky short-term. Note that many of the Everbank "CDs" are actually derivatives, though that's probably OK unless the entire financial system falls over quickly.

I am thinking of diversifying into Bill Fleckenstein's fund, though I need to research it first.

My philosophy is that normal commodities are risky since
a) they have had quite a ride already; and
b) industrial commodities will tank once the recession really hits.

Gold is also risky because the market is manipulated, though this is a controversial opinion. The central banks can dump gold at any time to affect the price. When TSHTF, however, I don't think they'll dump gold.

First thing, however, is to start extracting my 401k from stocks and bonds and putting it into something fairly safe. Short term European government bonds seems like a good place, but I need to find a fund that does that that I can buy within my 401K.

I've been lazy and also avoiding the moves because the whole thing scares me to death anyway. It's time to get going, however. One of my main faults as an investor is making these moves when fear makes me do it rather than ahead of time.

So now we're down to timing. I think it'll be after the election unless we had a major terrorist attack and other countries decided to bail. The 'smart money' seems to be betting on that.

My current hypothesis is that (assuming we have a Bush victory and no major post-election legal strife) we'll have a post-election rally which will get played as much as it's worth and which may be worth riding. We'll see the current press hints that things are dangerous go away and be replaced by typical market hype. Then after the start of the year things will go sour., but I have no idea exactly when.

Then there's the big question: pay off the house now or plan on doing it in inflated dollars? The latter is fundamentally sound, but as John Maynard Keynes said, "Markets can remain illogical longer than you or I can remain solvent". Even better would be to sell and rent but that just isn't possible (my wife loves our house).

Long term I must be debt-free because when the recession hits it's going to be nasty and we need to be able to ride out the loss of good jobs and/or unemployment. If you own your house and have no debt you're going to be in better shape than the vast majority of people.

So what's your idea on timing? Timing is crucial. Some people say the current condition where Asia keeps the dollar up will go on for a long time (though not forever). Others say that they will have to stop sometime. One article I read had a very important point: it might not be Asia who ends the process. All it takes is one country to say 'I'll get out now so I don't lose when the dollar is devalued' and there will be a vast stampede for the door.

Incidentally, this is the same way the stock market will go. One major defector will start the avalanche. Last time people got burned, so now when the smarter people get back in the market they have stop-loss orders on their trades. The thing they don't understand is that if there is a dislocation all the stop-loss orders will go off at once, but nobody will be buying so there'll be a rout.

The Mad Hatter · Post by **The Mad Hatter** » Thu Oct 21, 2004 8:26 pm

Dirt wrote:
RunningMn9 wrote:Damn. They're already leasing crop land from neighboring countries because they can't make enough food. Now they are buying Canada's natural resources?

What happens when Canadians need them?
More importantly, what happens when the USA needs them? Don't we get most of our timber from there?

It's water that you'll probably need from us within a few decades. Fresh water reserves are declining around the world, including the US.

Unbreakable · Post by **Unbreakable** » Fri Oct 22, 2004 2:43 am

Yog-Sothoth wrote:One article I read had a very important point: it might not be Asia who ends the process. All it takes is one country to say 'I'll get out now so I don't lose when the dollar is devalued' and there will be a vast stampede for the door.

Incidentally, this is the same way the stock market will go. One major defector will start the avalanche. Last time people got burned, so now when the smarter people get back in the market they have stop-loss orders on their trades. The thing they don't understand is that if there is a dislocation all the stop-loss orders will go off at once, but nobody will be buying so there'll be a rout.

And bear in mind that Saddam's Iraq was bailing out on USD's and starting to base its economy on the Euro. See? It wasnt ALL about oil.

LordMortis · Post by **LordMortis** » Fri Oct 22, 2004 8:47 am

It's water that you'll probably need from us within a few decades. Fresh water reserves are declining around the world, including the US.

I like smack dab in the largest deposit of fresh water in the world....Which our good friend John Kerry seriously proposed to drain to alleviate the water needs of the rest of the country. (How does Canada like them apples?) Yep, John Kerry, friend of foreign countries, enviornmentally sound.

msduncan · Post by **msduncan** » Fri Oct 22, 2004 9:37 am

Dirt wrote:
LawBeefaroni wrote:China is global superpower. They buy what they need, and take what they can't buy, just like any other superpower.

Economically, they are going to kick our asses in the next 5-10 years. Millitarily they probably could right now. Politically, who cares. Politics are for countries that can't throw around their economic or military weight.

Prepare for your Chinese overlords.
China is still a quasi-Superpower. They could win a battle against the USA if it's fought on their own land. But they'd lose a global war pretty quick.

Oh my God! I agree with Dirt!

Gone Gold is gone.... the forums are the wrong color, and I'm agreeing with Dirt!

The WORLD HAS GONE COMPLETELY MAD!!!!!!!!!!

ok ok... I'm calm now.

I do agree with Dirt though.... China could beat us on their own soil becaue of sheer numbers and familiarity of the terrain. At this point in their history they'd lose any foreign engaugements pretty miserably though. There are many many reasons for this, but one of the main ones is that they simply don't have the logistics or the food to feed an army overseas or long distances from their base of operations.

LordMortis · Post by **LordMortis** » Fri Oct 22, 2004 9:45 am

There are many many reasons for this, but one of the main ones is that they simply don't have the logistics or the food to feed an army overseas or long distances from their base of operations.

That's easy enough to solve. All you need to do is buy nationalized property in foriegn countries for resources that can be harvested for you military on the move....Hey...Wait a minute.

Enough · Post by **Enough** » Fri Oct 22, 2004 12:07 pm

Very interesting thread. The emergence of the developing countries on the world market is a bellwether for our generation of things to come. One thing I have not seen mentioned in this thread is another less obvious way resources are flowing to China. As China begins to buy more of our grain they are helping us to use up a non-renewable resource: water.

The Ogallala aquifer is a huge underground reservoir covering a total area of 800 miles north to south and 400 miles east to west, and it serves as a primary engine for our High Plains farms. It is the largest aquifer in the world. Three of the most important grain-producing states—Texas, Kansas, and Nebraska—each get 70-90 percent of their irrigation water from the aquifer, not to even mention other top food-producers such as Colorado and Oklahoma. The Ogallala is a virtual fossil aquifer that is already mostly cut off from it's natural recharging sources almost completely.

Every bushel of wheat and corn China imports from these regions is essentially sending the Ogallala's water to China. Unfortunately, the aquifer is already getting hammered.

The Ogallala Aquifer in the central of US which waters 1/5 of the irrigated land in the U.S., is being mined at a rate of 12 billion cubic meters per year, a quantity equivalent to 1/6 of the annual flow of the Colorado River. As the water table falls, the cost of deepening wells and pumping becomes prohibitive, and land is taken out of production. Since the peak in 1978, the amount of land irrigated by the aquifer has fallen by 20% with a predicted drop of another 20% by 2020.

Link

Basically population growth and China's rapidly increasing hunger for grain imports from the Ogallala region will continue to drive the depletion of the aquifer and more and more land will have to come out of thirsty grain crop production. Soon other countries such as India could also play a significant role in its depletion. There is some hope of switching to less water-intensive crops but I don't know of any that could feed the same number of people. Conservation is an untapped resource to slow depletion but it would only buy time. The writings on the wall for this one and it isn't pretty.

noxiousdog · Post by **noxiousdog** » Fri Oct 22, 2004 12:35 pm

Hey! Take your water arguments to the Quinn threads!

Eco-Logic · Post by **Eco-Logic** » Fri Oct 22, 2004 12:54 pm

That is really interesting Enough. I knew nothing about that. Thanks for the post

Dirt · Post by **Dirt** » Fri Oct 22, 2004 1:03 pm

msduncan wrote:Oh my God! I agree with Dirt!

Pretty soon it will start raining blood.

setaside · Post by **setaside** » Fri Oct 22, 2004 1:22 pm

Then there's the big question: pay off the house now or plan on doing it in inflated dollars? The latter is fundamentally sound, but as John Maynard Keynes said, "Markets can remain illogical longer than you or I can remain solvent". Even better would be to sell and rent but that just isn't possible (my wife loves our house).

Long term I must be debt-free because when the recession hits it's going to be nasty and we need to be able to ride out the loss of good jobs and/or unemployment. If you own your house and have no debt you're going to be in better shape than the vast majority of people.

Well ... now that you've managed to scare the shit out of me ... what are you gonna do about it?

LordMortis · Post by **LordMortis** » Fri Oct 22, 2004 1:33 pm

I haven't read any of Quinn's work, but it seems that the title of this post was begging for him to get involved.

I am surprised his hounds have already started to feed.

Smoove_B · Post by **Smoove_B** » Fri Oct 22, 2004 1:50 pm

As part of my job, I do potable well water installation inspections. Basically, I stand around and watch the well driller drop casing into the ground. It's 6 or 10 inch diamater, 20 foot long sections of steel casing.

A few weeks ago, one of the well drillers told me that the price of the steel casing per foot has quadrupled.

I couldn't figure out why.

He told me that China is buying up every last SCRAP of U.S. steel, probably for construction. It's driven the prices up.

Now, I work in bumhug, NJ. If my local well drillers are experiencing this, I'm wondering what's going on elsewhere.

Granted, I've never read anything about a "steel demand", but I also doubt the well drillers would make this kind of stuff up. And this article seems to support what I've heard.

Crazy.

RunningMn9 · Post by **RunningMn9** » Fri Oct 22, 2004 1:51 pm

Eco-Logic wrote:That is really interesting Enough. I knew nothing about that. Thanks for the post

Unless that was sarcastic, I'm sure that cut through ND's heart. He has explained the US's water problems time and time again. Of course, knowing him, he's probably just glad you finally saw it.

noxiousdog · Post by **noxiousdog** » Fri Oct 22, 2004 1:58 pm

RunningMn9 wrote:
Eco-Logic wrote:That is really interesting Enough. I knew nothing about that. Thanks for the post
Unless that was sarcastic, I'm sure that cut through ND's heart. He has explained the US's water problems time and time again. Of course, knowing him, he's probably just glad you finally saw it.

I'll take anything I can get

Enough · Post by **Enough** » Fri Oct 22, 2004 2:01 pm

noxiousdog wrote:
RunningMn9 wrote:
Eco-Logic wrote:That is really interesting Enough. I knew nothing about that. Thanks for the post
Unless that was sarcastic, I'm sure that cut through ND's heart. He has explained the US's water problems time and time again. Of course, knowing him, he's probably just glad you finally saw it.
I'll take anything I can get

I have to admit I've been pretty scarce in the Quinn threads as of late (no pun intended LOL) and was curious if ND goes along pretty much with what I put out in this thread? Anything to add?

RunningMn9 · Post by **RunningMn9** » Fri Oct 22, 2004 2:26 pm

I don't know that we need a new thread, since this is already about resource consumption, but I'll dump this here...

Humans overconsuming the Earth by 20%

If I recall, and perhaps a motivated poster can scan one of the older Quinn threads in my posted archives, this was lower than 20% a couple of years ago.

geezer · Post by **geezer** » Fri Oct 22, 2004 2:28 pm

I have lots of thoughts on this but I don't know what I can add since I think almost the same -- I'm also struggling with if/when to pay off my property, where to harbor cash in something other than dollars etc.

One idea that I find somewhat interesting though is banking on Australia. As I see it, they are a "western" economy and as such not subject (As much) to the violent swings a developing economy is, but also is uniquiely primed geographically to take advantage of developing Pacific Rim (much in the way Austria is financing Eastern European development).

Another option I like is the Swiss Franc, because pretty much no one ever screws with Switzerland and they're about as central to a world currency clearing house as you can get. I agree that the Euro is the conservative choice, but it wouldn't surprise me at all to see it go to 1.35-1.50 in the next year or two, particularly if Kerry wins or Bush does not get a post-election rally in the economy.

As far as hard assets, I am currently looking into investment-grade diamonds, but that scares me for the same reasons you stated with regard to gold - the scarcity is artificially managed, and I'm counting on DeBeers to not mine too much of the stuff

Yog-Sothoth wrote:I have some physical gold and a fairly large stake in PSAFX. They have not done amazingly well since the drop in gold prices earlier this year (though they are coming back since gold is back up). I have a smaller stake in BEARX which I may expand as we seem to get closer to the edge.

I have a token Everbank account in Euros ready to be expanded when the time is right. Euros are the conservative choice, as they have already appreciated against the dollar. I may take a stake in Yen or Renminbi using some of the Everbank accounts, but this seems risky short-term. Note that many of the Everbank "CDs" are actually derivatives, though that's probably OK unless the entire financial system falls over quickly.

I am thinking of diversifying into Bill Fleckenstein's fund, though I need to research it first.

My philosophy is that normal commodities are risky since
a) they have had quite a ride already; and
b) industrial commodities will tank once the recession really hits.

Gold is also risky because the market is manipulated, though this is a controversial opinion. The central banks can dump gold at any time to affect the price. When TSHTF, however, I don't think they'll dump gold.

First thing, however, is to start extracting my 401k from stocks and bonds and putting it into something fairly safe. Short term European government bonds seems like a good place, but I need to find a fund that does that that I can buy within my 401K.

I've been lazy and also avoiding the moves because the whole thing scares me to death anyway. It's time to get going, however. One of my main faults as an investor is making these moves when fear makes me do it rather than ahead of time.

So now we're down to timing. I think it'll be after the election unless we had a major terrorist attack and other countries decided to bail. The 'smart money' seems to be betting on that.

My current hypothesis is that (assuming we have a Bush victory and no major post-election legal strife) we'll have a post-election rally which will get played as much as it's worth and which may be worth riding. We'll see the current press hints that things are dangerous go away and be replaced by typical market hype. Then after the start of the year things will go sour., but I have no idea exactly when.

Then there's the big question: pay off the house now or plan on doing it in inflated dollars? The latter is fundamentally sound, but as John Maynard Keynes said, "Markets can remain illogical longer than you or I can remain solvent". Even better would be to sell and rent but that just isn't possible (my wife loves our house).

Long term I must be debt-free because when the recession hits it's going to be nasty and we need to be able to ride out the loss of good jobs and/or unemployment. If you own your house and have no debt you're going to be in better shape than the vast majority of people.

So what's your idea on timing? Timing is crucial. Some people say the current condition where Asia keeps the dollar up will go on for a long time (though not forever). Others say that they will have to stop sometime. One article I read had a very important point: it might not be Asia who ends the process. All it takes is one country to say 'I'll get out now so I don't lose when the dollar is devalued' and there will be a vast stampede for the door.

Incidentally, this is the same way the stock market will go. One major defector will start the avalanche. Last time people got burned, so now when the smarter people get back in the market they have stop-loss orders on their trades. The thing they don't understand is that if there is a dislocation all the stop-loss orders will go off at once, but nobody will be buying so there'll be a rout.

Eco-Logic · Post by **Eco-Logic** » Fri Oct 22, 2004 2:32 pm

RunningMn9 wrote:
Eco-Logic wrote:That is really interesting Enough. I knew nothing about that. Thanks for the post
Unless that was sarcastic, I'm sure that cut through ND's heart. He has explained the US's water problems time and time again. Of course, knowing him, he's probably just glad you finally saw it.

I wasn't being sarcastic at all. I've never been in a Quinn thread so that's maybe why I missed it?

LordMortis · Post by **LordMortis** » Fri Oct 22, 2004 2:35 pm

A few weeks ago, one of the well drillers told me that the price of the steel casing per foot has quadrupled.

I read about businesses folding every week and nobody can maintain. The most successful of the suppliers for steel industry related materials are laying off like crazy.

And it's not just steel. Construction material in general is bad. Brick in particular is at a huge scarcity. Right now the coking and the peening materials are scarce for preparing steel. We can get the metals, we just can't prep them fast enough. China (with a shit ton of foreign investment) is currently getting ready to put about 150 steel foundries online to meet the demand in the next 3 years. Steel will get back on track then. At that point, industry after industry will have closed shop. As China takes on all of this industry, they will start valuating their Yuan(?), which is currently kept artifically devaluated to make sure their already subsidized exports are kept the cheapest on the market.

I feel like chicken little, but I really don't think the collapse is immanent. I just think our corporate and government interests are sleeping together too much in a too short sighted environment. I think that we've moved from mortgaging our future to mortgaging our present and I'm afraid that it will become irreversable if we don't make policy change soon.

And by irreversable, I mean that the US asks western Europe to move over for company in the back seat. Which, quite frankly, doesn't bother me. I want out of this thinking we are some sort of world leader crap. What does bother me, is that historically we do not go gently into that night, and it's not like we truly have righteousness on our side or anything.

RunningMn9 · Post by **RunningMn9** » Fri Oct 22, 2004 2:37 pm

Eco-Logic wrote:I wasn't being sarcastic at all. I've never been in a Quinn thread so that's maybe why I missed it?

Now you know better.

We talk about important and interesting things. Join us.

LordMortis · Post by **LordMortis** » Fri Oct 22, 2004 2:43 pm

What happens if we wake up tomorrow and collectively decide to barter with a non US dollar system? The dollar is Fiat dollar. What happens when we decide that we have no faith in it any more? What can be done to us (individuals, groups, etc...) If my business tomorrow stopped generally dealing in cash, how would they be taxed beyond property estimations? If they did not pay their employees in cash, how would their employees be taxed?

RunningMn9 · Post by **RunningMn9** » Fri Oct 22, 2004 3:24 pm

Hey, here's a little something else for ND, keeper of the chronicles of lost civilizations.

The city that is now called Cahokia

Oh, and here's another link about the WWF report, this one including some pearls of wisdom from the "There's nothing to see here!" camp:

Of course everything is OK

noxiousdog · Post by **noxiousdog** » Fri Oct 22, 2004 3:28 pm

Enough wrote: I have to admit I've been pretty scarce in the Quinn threads as of late (no pun intended LOL) and was curious if ND goes along pretty much with what I put out in this thread? Anything to add?

Not in this thread. The archived thread A world without water has this wonderful quoted section from Jaler:

From BBC:
In China it takes 1,000 tonnes of water to produce one tonne of wheat.

Increasingly, governments are seeking to solve their water problems by
turning away from reliance on rainfall and surface water, and using
subterranean supplies of groundwater instead.
But that is like making constant withdrawals from a bank account
without ever paying anything into it.
And using up irreplaceable groundwater does not simply mean the
depletion of a once-and-for-all resource.
Rivers, wetlands and lakes that depend on it can dry out. Saline
seawater can flow in to replace the fresh water that has been pumped
out.
And the emptied underground aquifers can be compressed, causing
surface subsidence - a problem familiar in Bangkok, Mexico City and
Venice.

Ninety-five percent of the United States' fresh water is underground. As
farmers in the Texan High Plains pump groundwater faster than rain
replenishes it, the water tables are dropping. North America's largest
aquifer, the Ogallala, is being depleted at a rate of 12 billion cubic
metres (bcm) a year. Total depletion to date amounts to some 325 bcm,
a volume equal to the annual flow of 18 Colorado Rivers. The Ogallala
stretches from Texas to South Dakota, and waters one fifth of US
irrigated land. Many farmers in the High Plains are now turning away
from irrigated agriculture, as they become aware of the hazards of
overpumping, and realise water is not in endless supply.

Mexico city is sinking because of the amount of water being pumped out
from beneath its foundations. One of the largest and most populous
cities in the world, it was once a lush land of lakes. But over the last 500
years the lakes have been drained and the surrounding forests chopped
down. As the city grew in size, the water problem magnified. With no
adequate drainage system, today rainwater mixes with sewage and is
used for irrigation. The city is now at serious risk of running out of clean
water. An estimated 40% of the city's water is lost through leaky pipes
built at the turn of the century.

More than half of Europe's cities are exploiting groundwater at
unsustainable rates. Chronic water shortages are already affecting 4.5m
people in Catalonia, where authorities are pressing for the construction
of a pipeline to divert water from the Rhone in France to Barcelona.

Water is the most precious resource in the Middle East, more important
even than oil. Competition for water from the River Jordan was a major
cause of the 1967 war. As populations increase, water becomes more
scarce, aggravating regional tensions. The Lebanese have long accused
Israel of having designs on the waters of the River Litani, and Syria
accuses it of being reluctant to withdraw from the banks of the Sea of
Galilee, the source of up to 30% of Israel's water. Israelis in the West
Bank use four times as much water as their Palestinian neighbours.

When the water levels of Africa's huge rivers drop, whole economies
suffer. Ghana, for example, has become totally reliant on the hydroelectric
output of the Akosombo dam on the river Volta. Mali - one of the
poorest countries on the planet - is dependent on the river Niger, which
flows from Guinea through Mali to Nigeria, for food, water and transport.
But great stretches of the river are now facing environmental
catastrophe as a result of pollution. In Nigeria, half the population has
no access to clean water, and as in much of Africa, many women walk
for hours a day to fetch it.

A United Nations report predicts that access to water may be the single
biggest cause of conflict and war in Africa in the next 25 years. Such
wars are most likely to be in countries where rivers or lakes are shared
by more than one country. There is already fierce national competition
over water for irrigation and power generation - most notably in the Nile
river basin. Cairo warned in 1991 that it was ready to use force to
protect its access to waters of the Nile, which also runs through Ethiopia
and Sudan. If the populations of these countries continue to rise,
competition for the water could be fierce.

The Aral Sea in Central Asia was once the world's fourth biggest inland
sea, and one of the world's most fertile regions. But economic
mismanagement has turned the area into a toxic desert. The two rivers
feeding the sea, the Amu Darya and the Syr Darya, were diverted in a
Soviet scheme to grow cotton in the desert. Between 1962 and 1994,
the level of the Aral Sea fell by 16 metres. The surrounding region now
has one of the highest infant mortality in the world, and anaemia and
cancers caused by chemicals blowing off the dried sea bed are common.

The most sacred Hindu river, the Ganges, is so depleted that the
Sundarban wetlands and mangrove forests of Bangladesh are seriously
threatened. It is also said to contain unacceptable levels of arsenic. As
more trees are chopped down, and more buildings erected along its
banks, the glaciers supplying the river have been melting, raising fears
of shortages and drought downstream. The river has been the subject of
a long-running dispute between India and Bangladesh, although recently
progress has been made in resolving the conflict.

All three rivers feeding China's Northern Plain are severely polluted,
damaging health and limiting irrigation. The lower reaches of the Yellow
river, which feeds China's most important farming region, ran dry for
226 days in 1997. Northern China is home to two thirds of the country's
cropland but only one fifth of its water. As competing demands for water
are made by cities, industry and agriculture, the land is drying up.
Between 1991 and 1996, the water table beneath the north China plain
fell by an average of 1.5 metres a year.

Australia is the world's driest continent. Settlers have long dreamt of
finding a way to turn coastal rivers inland. But an ambitious scheme to
reverse the flow of the Snowy River has backfired disastrously,
threatening to deprive Adelaide of fresh water. The region that the
diverted Snowy River now feeds is bounded by Australia's two longest
rivers, the Murray and the Darling. The water tables under this land are
now rising, pushing deadly quantities of salt to the surface. The salt has
already destroyed some of the country's most productive farmland. The
Murray-Darling basin produces three-quarters of Australia's irrigated
crops. Many of the basin's tributaries may be unusable for irrigation in
20 years time, let alone as a source of drinking water.

And the irony is that those were the days before I figured it out.