For decades American Governments have identified sources of materials in Third World countries and have then encouraged American companies to remove those resources for American use. For years the Chinese and the Indians were content to enjoy their fairly simple lifestyles (by Western values) and to let the Americans steal everything of value.
No more.
Today, the people of China and India want what they call an American way of life. They want smart houses, two cars, two television sets, air conditioning, a dishwasher, a refrigerator and a deep freeze filled with harmburgers and ice cream. (I always call them ‘harmburgers’ because they are so deadly.) They want computers and computer games and all the rest of the American dream.
If the rate of growth which China has exhibited for the last few years continues, then the entire Chinese nation will soon be as rich as the Americans are today. Despite recent slowdowns, within a couple of decades everyone in China will have an American style house and a couple of cars.
They will want to eat meat and eggs instead of rice. They will want to eat more of everything. And they will want everything nicely packaged.
This is not a wild forecast.
This is not even a prediction.
It’s happening.
In a few years’ time the Chinese will use up more oil than is currently being produced for worldwide consumption. They will consume as much grain as is being produced for worldwide consumption. They will use more steel than the whole of Europe and America. They will be responsible for more than doubling the number of cars on the planet. To satisfy their yearning for magazines, invoices and parking tickets the production of paper will have to double.
That’s just China.
Within a few years India will have a bigger population than China. The Indian economy is growing almost as fast as the Chinese economy.
And then there’s the rest of Asia. And Russia. And Eastern Europe. And Africa.
It isn’t difficult to see why the world is running out of everything. You think of it — wood, steel, copper, water — the world is probably running out of it.
The prices of metals such as copper and lead have risen dramatically in recent years. And I believe they are likely to continue to rise — even when oil starts to become more expensive. The Chinese are not going to suddenly stop making motor cars or television sets. However, when the peak oil crisis really hits, these prices may fall (because the demand for metals will drop).
We are using up the world’s resources in general, and its minerals in particular, at an alarming rate.
If the world keeps going at its present rate then almost all minerals will run out in a decade or two’s time.
Uranium and the base metals will, I believe, all continue to rise in price in the near and mid-term. In the long-term, however, I believe that only the precious metals with a currency link (gold and silver) will rise ever onwards and upwards.
There are many mining companies available for investment. I suspect that the safest are probably the biggest. Huge multinational miners tend to have mines in different countries and they tend to produce and sell a variety of different metals. Smaller mines often specialise in finding particular metals and although their shares are invariably riskier the rewards can be much greater. A share in a small mining company may multiply tenfold or even more. On the other hand the company may disappear entirely and the shares become worthless.
Some small mining companies will have operating mines. Others will simply have licences to look for metals. In addition to the risk that a company may fail to find any metal, there are political risks. A greedy government may confiscate land or take a large chunk of a successful mine. Some of the entrepreneurs who set up small exploration companies are roguish individuals who have spotted an opportunity and who are eager to make money out of gullible investors rather than out of digging metals out of the ground.
In the past, mining has been a cyclical business. The value of mining companies went up and down almost regularly. When the price of a commodity went down miners would close down mines and not open up new ones. The commodity would, therefore, become scarcer. When the metal became scarce enough the price would rise. And, in the nature of these things, the price would rise up to a level way beyond the level it had previously attained. At that point mining companies would start digging again. And entrepreneurs would raise capital to go exploring.
Soon there would be more than enough of the metal around. And the price would fall again.
This time things may be a little different.
(That is, I admit, the most dangerous thing anyone can believe about financial markets. It’s what people say all the time. When dot.com shares went to ridiculous heights at the end of the 20th century, all the enthusiastic analysts and investors were chanting ‘this time it’s different’. It wasn’t of course. Prices collapsed and investors lost their shirts, trousers, shoes and socks.)
However, I believe things may be slightly different in mining because we’re talking about commodities (metals) which are known to be available only in limited quantities. There is only so much copper available and accessible. Once it’s gone you can’t make any more. And if demand soars then the availability and price of the metal must alter. And although metals are running out, the demand for them is soaring. The industrial revolution boom has hit China, India and a dozen other rapidly growing countries all at the same time.
In mining, probably more than any other area of investment, geopolitical circumstances and the macroeconomic situation have always been crucial. And the geopolitical and macroeconomic circumstances mean that this time the upturn in the mining cycle is likely to be sharper and longer than usual.
There is, however, a big warning attached to mining companies: when the oil shortage becomes severe building programmes will have to stop. There won’t be any oil for making cars so there won’t be any need to build roads. New cities won’t get built because the problems created by the oil shortage will be devastating. And there won’t be any oil for tractors or combine harvesters.
At that point mining shares will crash.
There won’t be much of a market for steel, copper or any other non-precious metals.
It is a curse to live in interesting times.
And it should, by now, be clear just why the conspirators want to reduce the world population so dramatically.
This essay is based on an essay from the book 101 Things I Have Learned by Vernon Coleman. The book is available on Amazon as a paperback and an eBook.