Gold

[Lizard]

What do you think of the big theory I have (OK, I think I pinched it from many others) that all of the world's troubles are related to the current cost of energy in all its forms?

Actually, I'm pretty relaxed about the "world's troubles", which in many parts of the world are far less than they were in the 80's and 90's. I think we should be celebrating this much-needed period of adjustment. I actually don't think the answers are that difficult any more - just slow to implement and a bit of a balancing act.

Yes, energy cost is an important factor in regaining a happy equilibrium again. Longer term, other resource shortages will be more critical.

For me, much of the adjustments we are facing relate to the period in which we have finally allowed Asia the opportunity to join us in the developed world.... it's been a very rapid period of change and the speed tends to create more extreme imbalances, including in energy costs. Overall though, this has been a big step in the right direction for human rights. Naturally it means that we can't expect to benefit as much from outsourced slavery. We need to return our focus to our own productivity if we want to maintain our living standards in the face of this adjustment. We may also want to make some compromises in our living standards - allow the carpet to get a little more threadbare... I love beautiful things as much as the next girl, but I'm all for ditching the "Home & Garden" obsession.

[Skol]

I keep hearing all the time that things are tough. I'm waiting for a painter (new year), 2 quotes for a garage door and opener, some fencing, some serious plumbing work, and a factory door installation (which I 've been working on since March).

I keep hearing how busy they all are. The aircraft are full, what's going on?

Times are tough? I doubt it.

I run a 5 month moving average of my aussie shares and when it crosses over the actual value there's generally some serious money to be made or lost.
The actual value crossed over the moving average last month which means good news.

Good news in the sharemarket probably means bad news for gold.

[STRAT]

, other resource shortages will be more critical.

.

Hi Liz.
I smell opportunity in that remark

[Lizard]

Hi Liz.
I smell opportunity in that remark

It may be a very long-dated opportunity....

[elZorro]

Actually, I'm pretty relaxed about the "world's troubles", which in many parts of the world are far less than they were in the 80's and 90's. I think we should be celebrating this much-needed period of adjustment. I actually don't think the answers are that difficult any more - just slow to implement and a bit of a balancing act.

Yes, energy cost is an important factor in regaining a happy equilibrium again. Longer term, other resource shortages will be more critical.

For me, much of the adjustments we are facing relate to the period in which we have finally allowed Asia the opportunity to join us in the developed world.... it's been a very rapid period of change and the speed tends to create more extreme imbalances, including in energy costs. Overall though, this has been a big step in the right direction for human rights. Naturally it means that we can't expect to benefit as much from outsourced slavery. We need to return our focus to our own productivity if we want to maintain our living standards in the face of this adjustment. We may also want to make some compromises in our living standards - allow the carpet to get a little more threadbare... I love beautiful things as much as the next girl, but I'm all for ditching the "Home & Garden" obsession.

Interesting Liz, I hadn't thought too much about that big factor, China/India and their labour pool. The long-term shortage of resources is tied to energy though, if you think about it. If power was really cheap, you could desalinate seawater and pump it inland anywhere you needed it. You could use as much fuel as you liked to extract minerals and metals from the earth, and so on. More of everyone's earnings would be available for retail spending, etc. Of course, the whole thing about the ethics of being on the consumer treadmill, that's a different question.

[elZorro]

I keep hearing all the time that things are tough. I'm waiting for a painter (new year), 2 quotes for a garage door and opener, some fencing, some serious plumbing work, and a factory door installation (which I 've been working on since March).

I keep hearing how busy they all are. The aircraft are full, what's going on?

Times are tough? I doubt it.

I run a 5 month moving average of my aussie shares and when it crosses over the actual value there's generally some serious money to be made or lost.
The actual value crossed over the moving average last month which means good news.

Good news in the sharemarket probably means bad news for gold.

Hi Skol, my urban neighbour has tradespeople doing electrical work, gardening, building, carpets, driveways, and this is usually in the weekend, even Sundays. You might have to give up on asking for quotes, just pay a bit more perhaps? We all like to pick and choose the work we do, and generally the dollar talks loudest.

[CAM]

Hi Skol, my urban neighbour has tradespeople doing electrical work, gardening, building, carpets, driveways, and this is usually in the weekend, even Sundays. You might have to give up on asking for quotes, just pay a bit more perhaps? We all like to pick and choose the work we do, and generally the dollar talks loudest.

It probably depends where and who you are. The better trades people always seem to be the busiest...funny that huh.
Maybe the ones that weren't so good have gone to Aus??...to leave the remainder somewhat busy.
Anecdotal evidence from a couple of guys I spoke to in rural Waikato said they were quiet...dead for one of them.
One was a builder the other a kitchen maker. Said they were getting enquiries but no one was committing.
Maybe waiting for the election to pass??

[Lizard]

Interesting Liz, I hadn't thought too much about that big factor, China/India and their labour pool. The long-term shortage of resources is tied to energy though, if you think about it. If power was really cheap, you could desalinate seawater and pump it inland anywhere you needed it. You could use as much fuel as you liked to extract minerals and metals from the earth, and so on. More of everyone's earnings would be available for retail spending, etc. Of course, the whole thing about the ethics of being on the consumer treadmill, that's a different question.

The consumer treadmill in itself is not really an ethical question beyond the very-long-term under-pricing of resources and the geographical imbalances in labour values. The rest is market forces and all fine - the level of consumption vs production that is desirable after that is up to the individual taste.

The issue of fuel has been more about a sudden increase in pricing of oil and fossil fuels in particular. That process happened almost "overnight" relative to the other changes that drove it... but in reality, I paid around $1/litre for fuel for many, many years and now pay around twice that - maybe still a little less... but it is still less than the income for a comparable job rose by over the same period, despite big increases in levies and taxes that came on top of the oil price. Off-setting the change is also the fact my car will now go further on it and my home heat pump is more efficient than the radiant heater was....

Yes, energy costs have gone up, but the amount they have gone up over the long term is not remarkable, only over this period of adjustment. Furthermore, the world is less energy constrained than we tend to think - fossil fuels are constrained, but we have an unlimited source of energy coming at us from the Sun and associated forces that also cause tides, winds and waves. And that's without tapping nuclear. It will take time to move across and for pricing to adjust, but I think the process of transition has been kick started in the last decade. Maybe it will take even higher energy costs before we get there, but then the cost should fall again.

The labour pool part is actually very relevant - in the past, international policies repressed Asia. However, in the last decade+ they were given considerable leeway - most noticeably in the pegged currency. This seemingly slight tweak to the "free market" has allowed China and some other parts of Asia an economic advantage in production and export. It is being and will continue to be phased out, one way or another.

As for Europe, US and global debt... money has been created out of debt and this is not wrong. However, we have reached unstable debt levels, so in order to obtain monetary stability, we actually need to maintain "money" while destroying the debt on which it was created - and that is "money" in the sense of "the momentum of money" or "money quantity x money velocity". So, since controlling the velocity part of that equation is difficult, we will control the quantity. That effectively means forgiving or writing off debt and yet still compensating creditors in some way with newly printed money... yet, managed carefully, this money will only be paying for the inflation we have already had from debt and velocity increases. i.e. the aim is to avoid both future deflation and hyper-inflation. A fine line and hard to control, since velocity tends to get out of control.

So yes, at this stage, it is all about seeing if governments can walk that line. And, in doing so, how much debt they choose to allow to be forgiven and how much capital sacrifice they demand from creditors (a deflationary effect) in the process and how much they print (an inflationary effect) to fill the gap...

...or at least that is the "simple housewife" version of the monetary world today.

[drillfix]

Having read that Liz, are you sure your not the Finance minister of NZ or something? LOL

All I can say is great post there Liz.

Oh, although one point from the 2nd last paragraph,

As for Europe, US and global debt... money has been created out of debt and this is not wrong.

Should that not be worded this is not Right? (rather than not wrong)?


Again, superb post.

[elZorro]

Yes, great post Liz. I wish I had done economics at college. Perhaps I should get a book out. I read somewhere else on ST that governments don't need to tax their subjects for income. They could of course, print the money. The tax is needed to create some value for the currency. Is this what you mean, a fine line beween printing, forgiving and taxing to create the stable illusion, or a stable reality?

Regarding energy costs: not so much how it hits our pockets, but perhaps the profits that are involved. I did note a short while ago, an uncanny correlation of the Dow market long-term, superimposed over the major oil finds in the states. While they were pumping lots of oil, their market boomed. And then it started crashing as the oil ran out. Everyone made a lot of money for a while, on cheap oil energy. It must have flowed throughout every enterprise. Might be oversimplifying the situation. Cheers.