The Great Depression Online




Great Depression Online Archive Issue:

The Silence of Your Inner Chi

Great Depression Online
Long Beach, CA
May 09, 2008

Inside This Issue You Will Discover…

*** Joe Blow Says to John Doe
*** The Silence of Your Inner Chi
*** Endless Money Finite Natural Resources
*** And More

Joe Blow Says to John Doe

Joe Blow says to John Doe circa 1999:

“My broker just got me into the new IPO for WhizBang.com.  They’re a ‘New Era’ business from Silicon Valley…part of the digital revolution…the miracle economy that’s going to make us all rich.”

A still ingenious Joe Blow to John Doe in late fall 2005:

“I just pulled equity out of my house and put it down on two spec condos in Miami.  By the time they’re built I’ll just flip one of them to pay for the other.  I just love real estate…it always goes up.”

The Silence of Your Inner Chi

Way back in the year 1998, when oil prices were just $12 per barrel, we never would have guessed that prices would rocket 1,000-percent within a decade.  But that’s what has happened.

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~~~~~~~~~~~~~~~~~~~~~~~~~

So with oil prices now persisting north of $120 per barrel we must pause, and ask…  What gives?

We’ve read and heard all about the usual suspects: OPEC, big oil, Nigeria, Iran, Hugo Chavez, runaway growth in China and India causing runaway demand on a stagnating supply.  The supply is stagnating – the Peak Oil theory says – because we’ve reached peak oil production. 

Then there are the greedy speculators who are bidding up the price of oil on the futures market, creating a mammoth oil bubble.

We don’t write to indict these suspects, or to deny their culpability, but we do have a hunch that there’s more to the story.  For if you pause, sit still, and meditate in the silence of your inner chi.  If you listen to your sixth sense and peer through your third eye into the deep dark shadows that lie below the surface…  You may find that there’s something mysterious…enigmatic…and sinister at work.

At first glance it’s hard to make out.  Yet through the haze you can sense that there’s something lurking.  Something puzzling…perplexing…and befuddling.

The same something that brought us the “New Era” dot.com bubble and the “prices always go up” real estate bubble.  It’s something called cheap money.  And it’s a gift from the Federal Reserve. 

Yet, to their chagrin, while they can give money away on the cheap, they can’t control where it goes.  And when it goes into the oil prices, as opposed to the stock and housing prices, it’s much less fun for Joe Blow and John Doe.

Endless Money Finite Natural Resources

Ben Bernanke began the current rate cutting cycle in September 2007 when oil prices were at a then exorbitant 80 per barrel.  In the following eight months, prices have jumped over 50-percent.

As you can see, the rapid price increases are as much a monetary phenomenon as they are a geological or geopolitical phenomenon. 

We like to keep things real simple around here: Cheap, debt based, money is increasing exponentially.  Natural resources are not.

How high will prices go?  Is $200 per barrel possible?  Is it likely?

We don’t know, but we’ll offer a guess…

When endless cheap money fully expresses its claim on finite natural resources, the ultimate price run up should be indescribable.  Add a geopolitical supply disruption, or a hurricane in the gulf, and we’re in for an atomic price explosion.

Sincerely,

M.N. Gordon
Great Depression Online

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