Gold

Have you ever wondered why gold is an expensive and valuable commodity? Yes it is a very pretty metal, easy to work with, great for making decorative work. But the quote below from SurvivalBlog.com gives the answer...

"How rare is gold? If you could gather together all the gold mined in recorded history, melt it down, and pour it into one giant cube, it would measure only about eighteen yards across! That's all the gold owned by every government on earth, plus all the gold in private hands, all the gold in rings, necklaces, chains, and gold art. That's all the gold used in tooth fillings, in electronics, in coins and bars. It's everything that exists above ground now, or since man learned to extract the metal from the earth. All of it can fit into one block the size of a single house. It would weigh about 91,000 tons - less than the amount of steel made around the world in an hour. That's rare." - Daniel M. Kehrer

Bottom Line

A few years back one of the museums in New York City held a special exhibit on gold. They built a room the size of the world's gold cube so you could stand inside and experience the total amount of known gold in the world. It's amazing how so little gold can go a long way.

Many survivalist get excited about gold as a hedge against inflation and protection against a currency crash. Personally I wouldn't know real gold from fake, so I worry about being swindled when gold is exchanged. I'd rather stockpile food. You can not eat gold.

Yet there are times when gold can be useful. When friends of ours lived in Saudia Arabia, they discretely wore some gold jewelry. If they ever had to evacuate the country quickly, the gold would help bribe their path to escape.

Here is a recent story online about gold...

GOLD HITS RECORD HIGH ON LOSS OF FAITH IN DOLLAR: “Gold prices on Tuesday surged to an all-time high after India’s central bank bought 200 tonnes of the precious metal, swapping dollars for bullion as the country’s finance minister warned the economies of the US and Europe had ‘collapsed’. India’s decision to exchange $6.7bn for gold equivalent to 8 per cent of world annual mine production sent the strongest signal yet that Asian countries were moving away from the US currency.”

Global Food Shortages?

'Each month is gay, each season nice, when eating chicken soup with rice.' -Maurice Sendak

The April edition of Scientific America asks the question, Could Food Shortages Bring Down Civilization? The author states:

For many years I have studied global agricultural, population, environmental and economic trends and their interactions. ... Yet I have resisted the idea that food shortages could bring down not only individual governments but also our global civilization. I can no longer ignore that risk. ... As demand for food rises faster than supplies are growing, the resulting food-price inflation puts severe stress on the governments of countries already teetering on the edge of chaos. Unable to buy grain or grow their own, hungry people take to the streets.

In the past century, spikes in grain prices were event driven and temporary. For example, in 1972 the Soviets quietly cornered the world wheat market before the rest of the world learned about their poor harvest. Wheat prices doubled that year but returned to normal with the next harvest. Other event-driven price increases included drought in the Soviet Union, a monsoon failure in India, and crop-shrinking heat in the U.S. Corn Belt.

But Scientific American believes the price increase in grains from 2007 and 2008 are different. These are caused by trends that are not likely to change:

• Ongoing addition of more than 70 million new people a year to feed. Yield gains in the 60s and 70s were amazing (+2% annually) but the "Green Revolution" has run its course. Global crop yields are now increasing at 1% a year while population grows at 1.2%.
• More money in China & India is allowing people to move up the food chain from a grain diet to a meat diet. It takes more grain to raise cows or pigs or chickens then to feed people directly.
• Massive diversion of grain to ethanol-fuel distilleries. The price for lower US fuel costs is more expensive global grain costs.
• Irrigation, which consumes 70 percent of the world’s freshwater, in many countries is now pumping water out of underground sources faster than rainfall can recharge them. Half of India’s traditional hand-dug wells and millions of shallower tube wells have already dried up.
• Topsoil is eroding faster than new soil forms on perhaps a third of the world’s cropland. The UN predicts that the African nation of "Lesotho faces a catastrophic future; crop production is declining and could cease altogether over large tracts of the country if steps are not taken to reverse soil erosion, degradation and the decline in soil fertility.”

Bottom Line
We don't see much said in the news but there is a growing global panic over food shortages.
- In 2007 leading wheat-exporting countries such as Russia and Argentina limited or banned their exports. Vietnam, the world’s second-biggest rice exporter, stopped exporting for several months.
- In response, nations like the Philippines are signing multi-year contracts for rice from Vietnam to ensure delivery.
-In Thailand villagers must guard their rice fields at night with loaded shotguns from “rice rustlers”.
-In Pakistan an armed soldier escorts each grain truck.
-In the first half of 2008, 83 trucks carrying grain in Sudan were hijacked before reaching the Darfur relief camps.

Modern Warfare

“War is Hell” – General Sherman, US Civil War

I suspect that when most of us picture “warfare” we imagine movie scenes from WWII or Vietnam with soldiers in the fields dodging artillery shells and bullets and land mines. But war has many faces, some modern/some ancient, including espionage, biological, financial and morale attacks.

Two days ago I discussed a WSJ article claiming that the CIA has found sleeping “time-bombs” in US utility computer systems. The concern is that Russians or Chinese could shut down our power grid or water systems via Internet espionage.

Most people would guess that biological/chemical warfare is something new with germs & DNA experiments and Anthrax in the mail. But think back to WWI and mustard gas attacks. Two centuries ago US pioneers gave Indians blankets from smallpox victims in an early attempt at viral warfare. I suspect bio/chemical war goes even further back.

A recent article in Politico.com describes how the Pentagon preps for economic warfare. In the first every financial war-game simulation, five teams representing The United States, Russia, China, East Asia and “all others” battled for supremacy with the world economy as the battleground. China won by taking advantage of damage that the US and Russia inflicted upon each.

Lastly there is the concept of demoralizing your enemy in the hope of encouraging an easy surrender. Sadly I see the US doing this to itself. Universities and the media love to portray the US as the cause of the world’s problem; or as an especially evil or unjust nation. Our own President apologizied for past US actions during his European Tour. I’m reminded of Pogo saying, “We have met the enemy and he is us.”

Bottom Line
The principles of warfare have not changed – soldiers, arms, espionage, spying, finance, morale, etc. But what has changed is the technology of warfare. Modern weapons in the arsenal of death allow individuals to kill millions with a computer virus, a biological virus, a suitcase nuclear bomb, and so on. Few people realize how dangerous this truly is. In the past it took the resources of a nation to start a war resulting in massive death. Now a millionaire, like Osama Bin Laden or George Soros, can fund a private war against America or a President they dislike. So far, we have been extremely lucky that physical terrorist attacks have been small scale. We have not been so lucky against morale attacks. Example:

"At the recent meeting of G-20 nations in London, officials from many nations agreed on one thing -- that the United States is to blame for the world recession. [AND] President Obama agreed." But in realitiy IT DIDN'T START HERE

"America, to hear President Obama tell it, is an occasionally arrogant nation struggling with shameful legacies of racism and discrimination, one that bears a large share of the blame for the world's economic and climate crises. Oh, and our train service is lousy." - Obama tries out role as apologizer-in-chief

Update

Speaking of one-man espionage, "PHONE SABOTAGE IN SAN JOSE." One man climbed 10 feet down a manhole and clipped five or so fiber optic phone lines cutting off phone service, ATMs, and 911 for Santa Clara and Santa Cruz counties. “It’s kind of like an earthquake” said one victim.

Global Economic Depression

“A ship is safe in harbor, but that's not what ships are for” - William
Shedd

The article Shipping rates hit zero as trade sinks from http://www.telegraph.co.uk/ reports that,

Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October. …"This is a whole new ball game," said one trader.

Why is this significant you ask? This is a contra-indicator for one of my favorite books, The World Is Flat by Thomas L. Friedman. While the world looks small and everybody is your neighbor or BFF via the internet, in order to exchange more than just ideas and pictures, we still need ships to carry goods between countries.

The shipping problem began last fall with the banking and credit crisis. Shippers were unable to obtain routine letters of credit “causing goods to pile up at ports even though there was a willing buyer at the other end.” The credit problem has been resolved, but the shipping industry is now plagued by global trade contraction:

Trade data from Asia's export tigers has been disastrous over recent weeks … “This is no regular cycle slowdown, but a complete collapse in foreign [US, UK and European] demand."

To keep ships sailing, shippers have cut their fees to zero and will ship containers at “bunker” (i.e. cost) rates so as to earn some money to cover crew salaries, insurance, docking fees and other fixed expenses.

Offering slots for free is akin to an airline giving away spare seats for nothing.

Bottom Line

The shipping crisis is further proof that we are experiencing a global economic depression. Do not expect a quick turnaround or a quick fix. The US “bailouts” are keeping companies alive but will do little to stimulate the US or world economy.

What should you do? Cut expenses and build up your savings now. We will be facing many rainy days ahead.