The Coming Collapse of Gold

Photo by Bjørn Christian Tørrissen

 Gold has been a store of value since the dawn of civilization, but that's about to change.  Gold prices are going to plummet in the future - permanently.  I can't give you  a date, but I can tell you how it will happen.

In all of human history we have managed to pan, blast, and pry about 176,000 metric tonnes of gold from mother earth.  While the oceans are estimated contain about 20 million tons of dissolved gold.  The gold is very low in concentration, about one milligram in a ton of sea water.

Although many people have tried to extract the gold from the sea, none have done so successfully.  The most famous was German chemist Fritz Haber who tried to pan the oceans for gold to repay Germany's war debt.  Many swindlers have tried to sell the idea, but only succeeded in mining gullible rich people.

Photo by US Mint

 But that will change in the future.  A few methods may be possible to rob Poseidon of his wealth.
1.  Microbes are known to take dissolved gold and produce solid gold.  Pedomicrobium 
is an example as is Delftia acidovorans . These could be genetically altered to increase their yield.

2.  Designing sheets of materials that have an affinity for gold and placing those in ocean currents.  The sheets are anchored to the sea floor and recovered months later after filtering the precious metal.  Japan has used a process like this to test the recovery of Uranium..  Uranium is much more abundant in ocean water, 4.5 billion metric ton, but the concept is the same.
3.  Plants like kelp could be genetically engineered to have an affinity for gold and then be harvested.  Although this solution has many obvious issues.  Otters with gold-capped teeth anyone?

Photo by Bullion Vault

As material science progresses, it is just a matter of time before we can start to pan the oceans for gold.  It may take 10 years, or 50, but eventually someone will crack the code.  When they do, vast new quantities will pour into the world's markets permanently depressing the gold market.

Which Foreign Countries Own the US Debt?

After a dinner conversation, I was interested to know exactly which countries own the US foreign debt. I went the the treasury's website and created the above chart. China is now the largest [foreign] owner of US debt with 682 billion, followed closely by Japan with 577 and the United Kingdom good for 360 billion. Interesting that Japan owns almost as much as China, but we hear so little about Japan.
The total US Debt in November of 2008 was about 10.6 Trillion, so the foreign ownership is 28%. Is this a good thing?

MR. BURN-A-KEY IS STEALING MY MONEY?

I didn't mean to overhear the conversation, but it's funny how baby monitors and older cordless phones interact over the 900Mz range. Just after breakfast I heard this through the baby monitor.

[Baby breathing and twisting in crib...]

"OFFICER, THIS IS CLARENCE JOHNSON AND I'VE BEEN ROBBED!"
"This is officer James O'Malley, and you need not shout Mr. Johnson."
"WHAT? YOU NEED TO TALK LOUDER. SEE I WAS IN THE WAR AND LOST MY HEARING. WORKED ON JETS IN KOREA. ONE OF THEM BLEW UP RIGHT BESIDE ME."
"All right Mr. Johnson, I'll speak up."
"THANKS SONNY - SOMEBODY DONE AND GONE STOLE MY MONEY."
"Are you alright?"
"YEAH, YEAH, I'M FINE BUT MY MONEY'S GONE."
Ok, when did this robbery take place."
"IT STARTED A FEW YEARS AGO AND THEY'VE BEEN STEALING A THOUSAND DOLLARS A MONTH."
"Well, that's a lot of money Mr. Johnson."
"AND I NEED IT. I'M 87 YEARS OLD AND LIVE ON MY SAVINGS."
"So did the thieves break into your house?"
"NO, NO, THEY BEEN TAKING IT STRAIGHT FROM MY BANK ACCOUNT."
"Well, I'll need to transfer you to our fraud division."
"NO, NO, I ALREADY TALKED WITH THEM AND THEY SAID IT AIN'T NO FRAUD - THEY'S AS WORTHLESS AS LIPSTICK ON A DUCK."
"I'm sure they are doing the best they can. I'll see if I can help you. Now how did these crooks steal your money?"
"WELL, DON'T TELL THE NEIGHBORS, BUT MY WIFE, God rest her soul, AND ME SAVED FOUR HUNDRED THOUSAND DOLLARS IN OUR YEARS FROM ME WORKING, AND MAYBE A LITTLE FROM BESSIE'S DADDY WHO HAD THIS LITTLE FARM OUTSIDE OF DALLAS."
"That's a lot of money."
"I'D BEEN GETTING LIKE 16 HUNDRED DOLLARS A MONTH FROM MY SAVINGS ACCOUNT. A MAN CAN LIVE LIKE A KING ON 16 HUNDRED A MONTH."
"Ok, keep going."
"LATELY IT STARTED GETTIN SMALLER EACH MONTH. 16 HUNDRED, 14 HUNDRED, AND NOW ONLY 600 DOLLARS! THEY'RE STEALING MY MONEY!"
"Ok, calm down Mr. Johnston, and you really don't have to shout. I'm not the one with the hearing problem."
"WHAT?"
"Mr. Johnson, what's happening is that your interest rate is just going down. It was 5 percent or so a few years ago and a good bank savings rate these days is 2 percent. That's all that's happening. No one is stealing your money."
"WHO IN TARNATION MADE MY RATES GO DOWN?"
"Well, the Federal Reserve Board sets interest rates and they had to lower them recently to help out some bankers who were in trouble."
"BANKERS? ARE THEM D*** BANKERS HAVING TROUBLE PAYING THEIR LIGHT BILLS? ARE THEY SWEATIN LIKE PIGS IN THE TEXAS SUMMER?"
"You don't have to shout Mr. Johnson. Ben Bernanke and the Fed have to save the banks or everyone will panic. They are doing all of us a favor by lowering interest rates."
"SO THIS MR. BURN-A-KEY IS STEALING MY MONEY?"
"No it's not him, he's just helping the banks and everyone else to not panic."
"IS HE CAUSING THE GAS PRICES TO GO UP? I WENT TO FILL UP..."
[My baby starts crying and needs a few minutes of comforting...]
"...no, no Mr. Johnson, the price of gas is also due to inflation which is about three percent."
"THREE PERCENT EH? MY SON SAYS THE INFLATION RATE IS SEVEN OR EIGHT PERCENT - I THOUGHT THAT BOY WAS FIBBIN."
"Well, no Mr. Johnson, if you calculate inflation like it was done a few decades ago your son's right - it's about seven percent, but since then all the presidents have fiddled with the numbers to make inflation look smaller so they wouldn't have to pay all that social security cost of living adjustment."
"SO INFLATIONS AT SEVEN PERCENT AND I'M EARNING 2 PERCENT? I'M LOSING LIKE ... FIVE PERCENT A YEAR ON MY SAVINGS? WHERE'S MY MONEY GOIN? WHO'S STEALING MY MONEY?"
"Just a minute Mr. Johnson I've got some police work to do."
[Whispering:] "Marge, I'll take a raspberry filled and an eclair...oh... grande please."
"Ok, I'm back. Now Mr. Johnson, no one's stealing your money and fortunately for you , you have four hundred thousand in the bank you can just withdrawal some of that for your light bill."
"SONNY, ITS KINDA EMBARASSIN BUT THE MONEY'S IN A THING AT THE BANK. BESSIE'S DADDY WASN'T THE TRUSTING KIND AND HE'D GONE AND PUT IT SO I CAN'T GET AT IT - JUST GET THE INTEREST MONEY."
"Mr. Johnson, I've got to go now. Sorry I can't help you. Maybe you could buy a fan and turn the lights down in the evening and go to bed earlier."
"WHAT DID YOU SAY SONNY, SEE I WAS IN KOREA WITH THESE JETS..."
[Our baby started really crying over the monitor and that was it for the phone call.]

Why Oil will be $30 a barrel in 30 years

Ok, Ok, I know you don't believe me and it's heresy to say such things, but please read on.



In the US we use two-thirds of our 21 million barrels of oil a day for transportation.
If you believe the CIA factbook we import 58 percent of our oil. Let's see, if we do the math, that's 66 percent imported - 58 percent used in transportation, uhm, that gives us 6 percent left over.
The US would be self-sufficient in oil if we replaced the energy in our transportation sector with something else. If the US were self-sufficient in oil production, the price of world crude would collapse.

Any of the following, or more likely combinations of these, will make this happen:

1. Electric Cars. Electricity is much cheaper than gasoline to power cars. Electricity can be produced domestically in the US from solar, wind, geothermal, biomass, wave, coal, or nuclear. The problem with electric cars is the battery. Batteries today are too expensive, too heavy, and have too short of a life span. That is changing. If any of many competing successors to our current battery technology pan out, the electric car will replace a majority, but not all, of our petroleum-based vehicles. Things like supercapacitors from technology by MIT, GT, RPI, EEStor, or EPod, could easily make the electric car viable. Incremental improvements to our lead or Lithium batteries may work.


2. Shale Oil. Colorado has three times the energy of Saudi Arabia, but it's locked up in rock. Shell oil thinks it has a way to produce the oil for $30 a barrel.


3. Coal. Coal can be converted into liquid fuels for about $35 dollars a barrel. Germany, Japan, and South Africa have all done this. These technologies have not been pursued in the past because oil was so cheap. Who wants to invest billions in a refinery to make $35 oil when it may drop to $20?.

Many other technologies like cellulosic ethanol, biodiesel, methane hydrates may also work.

If OPEC will just keep prices high for the next decade, people will invest in these alternate technologies and eventually the price of crude oil will collapse.
Despite what all the "peak oil" supporters claim, these alternate technologies will force the cost of oil to be only $30 a barrel in 30 years.

US Debt Approaches 10 Trillion Dollars

Our national debt is approaching 10 Trillion dollars. That's 30,000 dollars for every man woman and child in the united states. A nice chart showing the growth of the debt is here.
Half a trillion for the wars in Iraq and Afghanistan certainly have not helped.
Here's a list of our foreign friends who finance 2.2 Trillion of our habit:

Data from http://www.treas.gov/tic/mfh.txt.