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Gold Bears Ignore Supply Contradictions

Gold Commentary

As we see gold and silver prices plunge lower (again) today; it becomes an especially good idea to step back, and look at the Big Picture of these markets. Why? Because nothing happened today.

What is the official propaganda today from the Corporate Media on why precious metals prices have fallen?

Federal Reserve Chairman Ben S. Bernanke said stimulus may be reduced later this year as the economy recovers.

The problem here? B.S. Bernanke (aka “The Boy Who Cried Exit Strategy”) has been saying this every day for 4 ½ years. There was literally not one word that was new. It could have all been copied-and-pasted from one of his 2009 scripts. Simply calling this “news” is a perversion in and of itself. So nothing happened today in bullion markets.

With today’s price-action having no connection with the real world, and with any Bernanke “prediction” of an Exit Strategy having no connection with sanity; it behooves us to look at the actual supply/demand dynamics for bullion markets – something never attempted by the Corporate Media itself.

Here we see yet another fundamental contradiction by the “bears” of the propaganda machine. While we have these Chicken Littles relentlessly making absurd price-predictions for the gold market; these bashers are simultaneously spreading at least as much doom-and-gloom on their “predictions” for the mining companies which supply these metals.

Herein lies the contradiction. You can’t (rationally) be “bearish” on both the price of gold and the supply of gold. If one is low; this implies the other will be higher. More emphatically; you can’t be bearish on both the price and supply of gold at a time when there is already a 1,500+ ton per year supply deficit in this market.

Let me explain the mechanics here, for any/all readers to whom this is not obvious. Let’s start with plummeting prices; precisely what the Banksters have manufactured in bullion markets today. What is the consequence of these lower prices?

To get that answer, we need only refer to the propaganda from Basher Central; more commonly known as Kitco:

…“Everyone thought at $1,600, $1,800 and $1,900 (that) all the mining companies were making profit hand over fist, but the reality is that the capital costs of construction had escalated so signficantly that the margins of production and the margin of operation were still tight,” Gray said.

$1,300 is not a sustainable gold price…”

Let me translate that remarkable statement. When all of these very same gold-bears were writing their drivel about “a gold bubble” for the past four years; they were all lying. Gold priced toward $2,000/oz was nothing more than the minimum price needed to sustain some semblance of health in the gold-mining sector.

And having gotten that much of a mea culpa, we get the remainder of the confession: $1,300/oz is not a “sustainable” price for gold today. Thus we have a collection of Serial Liars acknowledging that informed investors should not have listened to anything they were saying about the gold market over the past four years (at least).

Now these same Serial Liars are “predicting” many dark days (and even lower prices) ahead for the gold market; because the Boy Who Cried Exit Strategy has cried “exit strategy” for the 1,000th time. And we’re supposed to be convinced by this “prediction”; from these esteemed analysts?

But let’s assume that they were correct. In fact, let’s assume that the King of the Buffoons is correct and the price of gold will be manipulated to $1,000/oz. What then?

If the gold-mining industry isn’t sustainable (at all) with gold priced at $1,300/oz; what would happen with gold at $1,000/oz? A collapse in supply…in a market which already has a greater-than-1,500 ton per year supply-deficit. A deficit already 60% greater than annual mine-supply.


Gold-Bashing Mythology Hits New Crescendo

Gold Commentary

In wading through the mainstream drivel written on the gold and silver markets; it becomes increasingly difficult to reply to such material without the word “desperation” creeping in again and again. Indeed, the quantity of gold-bashing itself is simply overwhelming.

In the years I have covered this market, I have never seen as many mainstream articles written about the (supposed) “bear market” today as were written during the 12 years in which the mainstream (grudgingly) acknowledged the bull market in precious metals.

This, of course, is entirely atypical behavior for a propaganda machine notorious for worshipping “winners” and shunning “losers”. When a particular company/sector falls from favor as a hot place for financial gambling, there is a brief frenzy of dancing-on-the-grave of the former darling – and then it is forgotten forever.

Not so with precious metals. Indeed, the more rabidly the mainstream propagandists insist that the precious metals sector has entered a “bear market”; the more obsessed they become in “covering” the sector. The lady doth protest too much, methinks.

This perverse behavior of the mainstream media is only one utterly obvious indicator giving lie to claims of a “bear market”. Global demand for physical gold bullion spiked to an all-time high around the world following the Great Paper Liquidation, which drove down prices in the phony paper-fraud markets for bullion in New York, London, and Shanghai.

The propaganda machine has never attempted to “explain” how/why you can have record demand in a “bear market” – because it can’t. High demand is the definition of a “bull market” in the real world. Bulls stampede. Bears hibernate.

Once upon a time the Drones in the mainstream media could understand at least this simple truth of market fundamentals, but apparently no longer. The lie of a “bear market” is fundamental to all the other gold-bashing mythology, and so it remains in their shrill rhetoric – despite its perverse absurdity.

Because of this mythological bear market; we have a growing herd within the mainstream media “predicting” another wave of gold-hedging from the world’s largest miners. Prices are low; so why doesn’t everyone lock-in (and forward-sell) years of their production at these give-away prices?

In any other sector, forward-selling years worth of production with prices at the lows of a “bear market” would be met with howls of laughter, but this is the gold sector. As noted in recent commentaries; the world’s largest gold miners are nothing but a collection of banker sycophants. Their banker Masters command, and they obey.

Currently those Sycophants are in India, trying to persuade the world’s largest buyers of gold to buy less gold – at the request of their Masters. So getting the management of these miners to engage in more forward-selling of their gold is about as difficult as twisting the arm of Gumby. The problem for the bankers trying to induce another wave of hedging is in getting the shareholders of these Sycophant Miners to embrace another, massive gold give-away – and thus the waves of propaganda predicting such a trend.

Of course to even partially justify “hedging” at rock-bottom prices, it’s necessary to add additional mythology: that this “bear market” will persist for an extended period of time. And so we come to the next, major propaganda initiative aimed at the gold market: yet more talk of a B.S. Bernanke “exit strategy” for the Federal Reserve.

How ridiculous is this propaganda? We’ve been promised an Exit Strategy by Bernanke every six months since the imaginary U.S. Recovery began. This particular lie has worn so thin that no one in the Federal Reserve or mainstream media or U.S. government will even use the words “exit strategy” – for fear of immediately setting off a chorus of laughter. And so they say exactly the same thing, but now use the word “tapering” instead.


World Gold Council Betrays Gold Investors

Gold Commentary

When I labeled the World Gold Council as the “World Paper Council” in a recent commentary; who knew that the WGC was about to add its own exclamation point to that title? But that is precisely what this sham-organization has done.

As a reminder (since it’s so easy to forget): the WGC is an industry trade-group representing the world’s gold-mining industry, or more specifically, most of its large gold-mining companies. In turn, these gold mining companies (and gold-mining executives) have a direct, fiduciary interest in promoting (and protecting) the interests of their shareholders.

What this means is that while the WGC itself has no direct fiduciary duty to the shareholders of these mining companies; the WGC members do have such a legal duty. This in turn means that in order for any action (or statement) by the WGC to be legitimate it must at least be neutral toward the interests of those shareholders – and preferably in their best interests.

This is not what we see today with the shameless pandering in which the WGC is engaged in India. Why is the WGC in India at all, engaged in openly cooperating with the Indian government about its supposed “current account deficit”? It went to the world’s largest gold market to try to trick its best customers into buying paper-called-gold instead of real gold.

There is no possible, legitimate basis for the WGC’s recent activities in India at all. It claims it is in India to provide some short-term economic assistance to the government of India. What possible valid function could the World Gold Council (a gold-mining trade group) be performing in India – a nation without any gold-mining industry of its own? What possible expertise could it have to offer?

Further proof of the illegitimacy of the WGC’s conduct is that this entire “issue” here is a fraud. There is no “current account deficit” in India; it is nothing but an accounting sham. For those lacking a background in economics; a current account deficit is ultimately a currency deficit. And this is what proves the issue is a fraud.

Supposedly, India is incurring a huge currency deficit in swapping the bankers’ paper “money” (one form of currency) for gold (another currency). This is literally like Indians engaging in swapping apples for oranges – and then the propaganda machine begins writing about India’s supposed “fruit deficit.” It is logically perverse.

It is the bankers who are claiming that India has a current account deficit. These are the same bankers who have always treated gold as a currency with all of their own rules/regulations. This was true even during all the years when the bankers were lying to the public and referring to gold as “a barbarous relic.” Thus it is impossible for the bankers themselves to actually believe that India has a “current account deficit.”

When bankers talk about gold; we expect them to lie. At the same time that the bankers try to dupe Victims into buying/holding paper instead of gold; the central banks themselves are swapping their paper for gold at the fastest rate in history.

Yet here we have the WGC prostituting itself in India to serve not the interests of the shareholders of gold-mining companies; but to serve the interests of their real Masters – the bankers.  As I noted in my prior commentary; all one needs to do is to look around the WGC website to see who it really serves: there is only two years of data on gold-mining and the gold market; but more than 15 years of bankers’ essays telling us how they want to use our gold.

Now we have the WGC declaring it wants to “work with” the central bank of India – to con Indians into buying less gold. Naturally, the propaganda machine lacks the integrity to state this openly. Instead we get the usual Weasel Words:

Mumbai: World Gold Council (WGC), the premier organization that promotes the use of gold globally, has approached the Reserve Bank of India to work with it so that yellow metal could be promoted as a financial asset, rather than just a physical asset[emphasis mine]


Building A Better Monetary System; Part III

International Commentary

In Parts I and II of this series, readers were presented with a bleak reality. We live in hopelessly insolvent economies. We live in societies with totally corrupted systems of politics and commerce.

The root cause of all these problems (as previously explained) are the predatory/parasitic economic abominations known as monopolies and oligopolies. Despite the fact it is universally understood in the realm of economics that these mega-corporations should never be allowed to exist; they now saturate the entire global economy.

With the dirty money of these Corporate Oligarchs being the source of all corruption in our societies; it will be impossible to restore either political integrity or economic sanity to our societies unless/until all these entities are smashed into little pieces. Yet with such reform not even mentioned in any current, political agenda; “smashing” the monopolies/oligopolies is not a realistic near-term goal.

Meanwhile, economic reforms (of some sort) cannot wait. The degeneration of our economies and the plundering of our societies is accelerating – not abating. With our public Treasuries already cleaned out; the Fascist regimes who now rule our societies have resorted to openly plundering private accounts, with the Cyprus Steal being their much-hyped “precedent.”

In such a dismal (if not hopeless) context; why have I chosen the monetary system as the starting point in attempting to repair our economies and rein-in the looting/destruction of our economies? The answer to that question comes straight from one of History’s most-infamous quotations:

Give me control of a nation’s money and I care not who makes the laws.

- Mayer Amschel Rothschild

There is considerable historical debate about whether such a statement was ever made (at least in public). However; two thousand years of empirical evidence makes such a debate totally moot. History shows us that whoever controls the money supply exerts ultimate control over the economy of any nation – and thus (at the least) tremendous leverage if not control over the government.

Understand that this is nothing more than a specific example of one of the oldest and most-primitive military doctrines: he who has the power to destroy something will acquire at least a certain degree of “control” from that capacity – providing one has the expertise (and lack of morals) to wield such influence.

In the case of the money supply and the resulting control over economies (and governments) the parallel should be obvious. Controlling the money supply provides the direct capacity to destroy any economy. Nowhere is this ultimate historical principle illustrated with greater clarity than in a superb documentary, The Money Masters.”

Boiled down to its nucleus; the equation is simple. Controlling the money supply allows the controlling entity to (literally) blackmail governments into pursuing policies favorable to and approved by the Money Masters. No better illustration of this exists than what is found at the 1:07-mark of this film.

The context is stark, and extremely relevant to the present. In 1836, President Andrew Jackson – one of the few unequivocal “heroes” of American politics – was seeking to cancel the charter of the United States’ (private) central bank cartel which existed at that time. The response of the head of the existing central bank, Nicholas Biddle was swift, brutal, and came in two parts.

His actions took the form of cutting-off all new credit to the economy and calling in all existing loans to the bank. In economically strangling the economy in this manner, he set off an immediate depression. This was accompanied by an infamous, public boast/rant:

Nothing but widespread suffering will produce any effect on CongressOur [i.e. the Banksters’] only safety is in pursuing a steady course of firm restriction – and I have no doubt that such a course will ultimately lead to restoration of the currency and the re-charter of the bank.

Economic blackmail. In this case there is neither any doubt as to the authenticity of the quotation, nor any possible ambiguity about the malice/arrogance behind those remarks.


Building A Better Monetary System: Part II

International Commentary

In Part I; readers received most of the brutal truth about the rapidly deteriorating and nearly hopeless situations facing the major economies of the Western world. Our nations are all either bankrupt or insolvent, and ruled by corrupt governments who long ago stopped serving the interests of their own people.

Worse still, from past experience (i.e. their own corrupt mismanagement) we have seen that most of the dominant Opposition parties in these regimes have also been bought-off. So in most major Western regimes, our “elections” are now little more than exercises in shuffling the deck-chairs on the Titanic.

There is zero possibility of our “leaders” ever initiating any positive reforms on their own. The only new policy they have attempted (since the crisis they created) was so-called Austerity. With all Western economies suffering from the worst revenue crisis in history; we have all of these myopic, Traitor governments doing nothing but hacking-and-slashing spending (on people).

As I immediately explained in my own writing; this was deliberate economic suicide. It was the equivalent of a doctor “prescribing” a diet for a patient already suffering from severe anorexia. As with putting an anorexic on a diet; all this economic suicide accomplished was to escalate the collapse of these economies. And as I predicted, all of these economies are in the process of abandoning Austerity.

This means that the only remaining “plan” from our Traitor governments is more of the same. Exactly what created all of our fiscal/economic problems: ever-increasing printing and borrowing. Meanwhile these (bankrupt) governments refuse to even attempt to increase revenues; because the only entities with substantial quantities of taxable wealth are their Masters: the monopolies, oligopolies, and ultra-wealthy Oligarchs who lurk behind them.

At the same time; our revenue-starved governments are handing out more-and-larger corporate subsidies than at any time in history – while these corporations sit with more cash than at any time in history, and brag about their profit-margins. There is no longer even an attempt to hide this corrupt double-standard. “Austerity” for the people; more-and-bigger hand-outs for the monopolies and oligopolies.

And nowhere is the corruption worse than in our financial sector; realm of the Western financial Mafia. Their largest single “business” (by dollar value) is laundering dirty money for the world’s drug cartels, terrorists, and any other criminals with large piles of cash. These Big Banks are caught in this money-laundering now on virtually a weekly basis; mostly originating from the Wall Street cabal. Not only is this crime syndicate never punished for its crimes; the U.S. Attorney General has publicly declared he will cover-up all their illegal acts.

While money-laundering may be the biggest, single money-maker for the banksters; their principal activity is manipulating markets. This is done primarily through two, entirely illegal endeavours: influencing markets with gigantic, paper bets in the (hidden/unregulated) shadow-markets of their derivatives casino; and via simply rigging markets with the Pied Piper software known as trading algorithms.

Thanks to “high-frequency trading”; manipulating markets has become significantly easier than shooting fish in a barrel. There is no longer anything either “free” or “open” about our corrupt markets, they are merely crime scenes.

We now have our parameters:

1) Total economic predation/parasitism from the monopolies and oligopolies which now saturate virtually every niche of the global economy.

2) Absolute political corruption, with no hope of legitimate government over the short term.

3) Completely corrupt markets, which are no longer “functional” in terms of the primary purpose of all markets: to regulate supply and demand by facilitating open commerce. “Price” is no longer the product of supply and demand; but rather it is the result of a crime.

How can positive change be made in such an utterly hopeless context? The populations of Western societies must revert from being Serfs, and remember how to act like Citizens.


Building A Better Monetary System: Part I

International Commentary

In attempting to remedy any particular problem; human beings are generally resourceful creatures. Thus when we tackle a particular issue and fail to come up with an adequate solution it is generally indicative of one of two flaws: defective execution of a plan, or a failure to correctly/completely define the problem.

Tactical problems in attempting to implement a particular strategy are an inevitable byproduct of being imperfect creatures, living in an imperfect universe. It is the thinking behind the phrase “trial and error.” When we attempt to plot some new course of action we hope to “get things right” in our first attempt; but (rationally) we don’t necessarily expect to do so.

Conversely, the failure to correctly design a solution because we originally failed to fully/correctly diagnose the problem is unforgivable. It is proverbial cart-before-the-horse thinking: attempting to “do something” before we even understand what we should be doing.

It is the numerous, serial failures in properly diagnosing the problems facing our economies (and societies) which has brought us directly to the dismal state of affairs in which we exist today.  Let’s first explicitly spell-out this current, economic catastrophe.

Most Western economies are hopelessly insolvent, and many are plainly bankrupt. Putting aside the monstrous, absolute size of these debt-mountains (such as the $200+ trillion in debts/obligations of the U.S.), and the terminal debt-to-GDP ratios of these governments; the behavior of these governments proves they are bankrupt.

Both the U.S. and the EU are now directly printing money merely to ‘pay’ the interest on their debts – i.e. “monetizing debt”. It is universally understood that monetizing debt is the last refuge of bankrupt sovereign debtors, before bankruptcy is imposed upon them by frustrated creditors.

Monetizing debt, and the currency-devaluation which always/automatically accompanies it is an open attempt to defraud creditors by “repaying” them with debauched currency worth only a fraction of what was originally lent to them. Since the Crash of ’08, it has ceased to be a question of “if” Western nations would be forced into bankruptcy (and Debt Jubilee), and become only a question of when. Debt-monetization is the exclamation point on this conclusion.

The major Western currencies (the dollar, pound, and euro) are already effectively worthless, which can be conclusively demonstrated in logical/mathematical terms. Sadly, however, these are only symptoms of the primary dilemma confronting us.

In the nearly 2 ½ centuries since the Industrial Revolution gave birth to the rise of the modern ideology known as “capitalism”, the theorists who have promoted its virtues have always attached a caveat of warning. We could never allow the existence of corporate, economic entities known as monopolies and oligopolies.

For centuries; it has been universally understood that monopolies and oligopolies are not only predatory and parasitic, but relentlessly corrupting influences on our governments and societies in general. It is why the “anti-trust” laws which have always existed in our societies have always been among the most rigidly and strictly enforced regulatory regimes in our entire system…at least they used to be.

Approximately a generation ago; a collection of foolish, corrupt, or simply weak governments across the Western world just stopped enforcing these laws – all in the name of the euphemism “globalization”. What was the driving force behind this globalization? The monopolies and oligopolies which had already managed to infect our economies.

The result of a single generation of globalization? The entire global economy is now almost completely overrun with monopolies and oligopolies. In an economic system where not one of these abominations should be allowed to exist; we have nearly total saturation. And what has this resulted in?

Unprecedented levels of structural unemployment exist across the Western world. Somewhere in excess of 60 million employable people in Western societies are not allowed to work. This is because our labour markets are deliberately structured to prevent these people from working. Proving the lack of good faith of our governments are the mammoth lies they tell us in providing their official unemployment “statistics”.


China Juggernaut Shows No Signs Of Slowing

International Commentary

Among my many pet-peeves concerning the business news reporting by the mainstream media is the apparent inability among this entire cadre of writers to either perform or even comprehend simple arithmetic. Nowhere is this mathematical illiteracy more-flagrant than with mainstream babble about “China’s slowing economy.”

More and more frequently, this is coupled with suggestions or outright accusations that China’s government is exaggerating its economic data. Let me deal with this second issue before the first.

Sadly, all governments exaggerate their economic statistics to some degree. Indeed few (if any) other writers spend as much time as myself in highlighting this lying-with-numbers. Here the “undisputed Champion” is the U.S. government.

There are too many examples to choose from; however I’ll restrict myself to a single, familiar anecdote. In the same month last year that the World Bank reported that “global food inflation” had spiked to an annual rate of 120%, the U.S. government reported literally 0% inflation” that month in the U.S. (and in June as well). Readers can judge for themselves the plausibility of food-inflation being at 120% “globally” (in our era of “globalization”); while total inflation was supposedly at absolute-zero among the obese U.S. population. Did nobody eat that month – or the month before?

Meanwhile, the inflation-rate is the basis for many other calculations, among them U.S. GDP. Governments must subtract the rate of inflation out of their GDP calculation; or the GDP estimate is exaggerated by the full amount of that inflation. A “garbage” inflation number must result in a “garbage” GDP number – and to precisely the same proportion/degree.

Thus no government in the entire world exaggerates its GDP estimates more than the U.S. government. So when the U.S. media (in particular) piles-on with all of its “China lies” propaganda about Chinese GDP; one might suggest that people who live in glass houses shouldn’t throw stones.

We are left with the premise that while China’s government undoubtedly does exaggerate its economic data; the level of exaggeration is (at worst) no worse than our own – and arguably less. No one is suggesting that China’s economic growth isn’t out-pacing the Western world. Governments with real economic growth have much less need to lie than those simply pretending that their economies are growing.

We can either simply throw out all economic statistics, and be left with no signposts at all in gauging economic performance relatively, between nations, or we can use the data given – adding our analytical “asterisks” where necessary.

In analyzing the growth of any individual economy; the most-relevant number is not the percentage change, but rather GDP expressed as an absolute, dollar-figure. This is the concept which is above the limited mathematical skills of the mainstream media. Why is this a crucial analytical distinction?

The key lies in another analytical concept beyond the ken of the mainstream media: dynamic analysis – including changes over time – rather than the infantile static analysis which is the specialty of these charlatans. This is best illustrated through hard numbers.


Canada’s $24 Billion Oil-Subsidy To The U.S.

Canadian Commentary

It has already been reported that Canada’s tar-sands oil exports to the U.S. are at a heavily discounted price. The size of that discount is generally stated as averaging $30/barrel. At the current North American quote for crude at around $97/barrel; this discount exceeds 30%.

However, rarely (if ever) is the horrific, total magnitude of this oil subsidy to the U.S. ever presented to Canadian taxpayers. And never has the outright betrayal by Canada’s Conservative government ever been properly explained.

By now, all interested Canadians will have heard the government’s tired excuse for this great oil give-away: we ‘only’ have one market to sell to (the U.S.) and so the Harper government is “unable” to obtain fair-market price for Canada’s crude exports. The absurdity of this argument is apparent the moment it is put into proper context.

The “one market” to which Canada can export its crude happens to be the largest oil-addict in the history of the world. Do drug-dealers complain they are “unable” to get the going-rate for their product because the junkies “refuse to pay” what the dealer is asking? Of course not.

Addiction is a powerful lever. The U.S. may feign disinterest in tar-sands oil while foisting this 1/3 discount on the limp-wristed Harper government. However, what would happen if Canada had a real leader in Ottawa who simply turned off the taps?

Fortunately we don’t need to speculate on the effect of such a strategy in hypothetical terms – because we have OPEC. What happened in the 1970’s when the gluttonous Western consumption of oil reached a totally unsustainable level (for the first time in history), and it thus became obvious that oil was relatively and severely under-priced?

OPEC “educated” Western governments on the true value of oil by restricting supply. Since that day forward, no government of any major oil-producing nation has been unable to get fair-market prices for their oil – except the Harper regime in Canada. The one “pusher” in the world apparently too inept to even obtain fair prices from the world’s greatest oil-addict.

Note that there is a slightly more-sophisticated argument used by Conservative apologists to supposedly explain the Conservative’s massive oil-subsidy to the U.S.: the “lack of refining capacity” for the heavy oil produced from Alberta’s tar sands. This argument is just as specious.

At the time the Harper government was shoveling $billions in subsidies to the oil industry to recklessly ramp-up tar sands production in Canada; the United States hadn’t built a new refinery in over 30 years – and there was no prospect of any new refining capacity coming on line. Are we to believe that no one in the Conservative government ever gave the slightest thought to how/where this crude oil would be refined?

That sort of mind-numbing ignorance would even exceed the level of incompetence/negligence we have come to expect from the Harper government. No government would commit the entire economic future of a nation on producing a product without making the slightest inquiries as to a market for that commodity.

Much more plausible is that this is a deliberate give-away to the U.S. by the Harper government, and a deliberate betrayal of the Canadian people. Plenty of evidence exists to support this thesis. We begin with the newly-born “shale oil industry” in the U.S.; an industry built nearly 100% on heavily discounted Canadian crude exports.

As noted in my previous, two-part series on U.S. shale oil; the propaganda machine has been trumpeting the news that U.S. shale oil production has now risen to a level of 7 million barrels per day. What the Corporate Media is much less eager to talk about is the greater than 3 million  barrels per day which the shale oil industry uses to produce that oil.

Even members of the Harper government should be able to do this math: how much shale oil would the U.S. be producing today without the 2.4 mbpd being exported from the Alberta tar sands? Suddenly all pretensions (on both sides of the border) that the U.S. “doesn’t need” this oil completely vanish.

But we have a much more overt betrayal of the Canadian people by the Harper government; a new outrage: U.S. oil-arbitrage. What would/could be the only thing worse than the Harper government giving-away 2.4 mbpd of Canadian at a 1/3 discount? Turning around and importing from oil from the U.S. – at full price.


The U.S. Energy-Independence Fantasty, Part II: Supply

US Commentary

In Part I, readers were confronted with some of the mythology surrounding the made-for-propaganda fantasy of “U.S. energy independence.” It primarily dealt with the demand-side of the energy consumption equation.

The basic dynamic of our oil-dependent economies was presented: for industrialized economies to grow there must be growth in oil consumption. What this means is that the steadily shrinking U.S. demand which has allowed the U.S. to somewhat narrow its gigantic oil-deficit has come at the cost of the U.S. economy continuing to shrink – irrespective of what is claimed in absurd, official statistics.

Presumably no rational American is interested in achieving “energy independence” at the cost of the continued disintegration of the U.S. economy, and what that implies: even more-massive unemployment, and even further deterioration in what is already a 50%+ collapse in the U.S. standard of living.

This brings us to the colossal oil-deficit itself. The propaganda machine regularly trumpets the news that U.S. oil production has now “risen all the way” to an estimated 7 million barrels a day (after ending 2012 at 6.5 mbpd). Yes, “risen” all the way to the same level of production as what the U.S. produced 20 years ago.

Does this mean the U.S. oil-deficit is ‘only’ as bad as it was 20 years ago? Of course not. Twenty years ago, U.S. oil imports had just climbed higher than U.S. oil production for the first time in history (i.e. it produced about half as much oil as it used).

Today, even after the collapse in U.S. oil demand it remains well above 18 million barrels per day (as of the end of 2012). This puts the U.S. oil-deficit at well above 11 mbpd – an oil-deficit more than 50% larger than 20 years ago. So in some perverse “Back To The Future” moment; the propaganda machine is urging Americans to celebrate the fact that the U.S. oil-deficit is more than 50% worse than it was a generation ago.

Actually, things are much worse than that. Twenty years ago, Big Oil still produced oil relatively efficiently; meaning that in producing a barrel of oil it only consumed a small fraction of that barrel in the process (as explained via the research/presentation of energy expert, Chris Martenson). Today, in producing its oil from “non-conventional” sources (like shale oil); Big Oil consumes more than half of every barrel of oil it produces.

As noted in Part I; this represents a 98% plunge in efficiency from when we first began producing oil at a large scale (and supplies were abundant). While Big Oil engages in environmental destruction/devastation on an ever more-appalling scale; its net harvest of oil from this raping-and-pillaging has collapsed. Let’s crunch the numbers.

With an oil-deficit which still exceeds 11 mbpd; the U.S. oil-deficit is larger than the total consumption of the world’s second largest economy: China. Given that the shale-oil industry consumes more than half of all the oil it produces; what would it take to close the 11+ mbpd deficit (keeping demand constant)?

U.S. oil production would need to increase by approximately 23 mpbd; or in other words it would have to more than quadruple from present production levels, all the way up to 30 million barrels per day. Let’s put this into context.

Currently Saudi Arabia is the world’s leading oil-producer at roughly 9.3 mbpd. Thus to achieve “energy independence” the U.S. wouldn’t simply have to equal the output of Saudi Arabia; it would have to more than triple it.

However, the energy-independence Zealots never let anything like “facts” get in the way of their claims. Indeed, they now simply make-up numbers. Witness the brand-new claim that U.S. oil production has now “topped” its total imports.


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Disclaimer: is not a registered investment advisor - Stock information is for educational purposes ONLY. Bullion Bulls Canada does not make "buy" or "sell" recommendations for any company. Rather, we seek to find and identify Canadian companies who we see as having good growth potential. It is up to individual investors to do their own "due diligence" or to consult with their financial advisor - to determine whether any particular company is a suitable investment for themselves.

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