Gold / Silver Forecaster - Global Watch -
Part I
[of a II part article]
The
chairman of a Senate oversight committee, Joseph Lieberman, has said he is
considering legislation to place limits on large institutional investors in
commodities markets, which have posted record prices this
year in agricultural products and oil. The chairman of the Senate Homeland
Security and Government Affairs Committee said that the legislation would be
aimed at speculators and other investors who use commodities as a way to
hedge against swings in other investment instruments like stocks and the
dollar.
For
some months now we have been warning of such controls and including the
potential for such legislation as mentioned here. We have been a lone voice
on this, but now the prospect is right up in front of us. Many long-term
investors have seen oil and food as a way of retaining or increasing value in
their portfolios, but the spreading food crises have shown the ugly side of
such market moves. What we want to do in the first part of this two-part
piece is to ask: If they are imposed what will be the consequences to the
global monetary system and their effect on gold and silver and their prices?
Legislation Preventing ‘Investment’ Buying of Oil
The
oil price is around $130 a barrel now having doubled in the last year. At
this rate the $4+ a gallon-days will reach us soon. Everyone is being badly affected.
It is clear from the market fundamentals that the future demand for oil will
inexorably rise, whereas supply looks to be
overtaken within the next couple of years. This situation is here to stay. So
why should the oil price come down except to give us a better opportunity to
buy more at a cheaper price? OPEC has little interest in seeing more supplies
come to the market as they see the investment and speculative buying as the
real driver of the oil price.
So
the pressure is on the politicians of the world to do something to help their
own constituents.
“Controls” are the first option they have at their
fingertips. We do expect this legislation to come in some form, if the oil
price does not pull back to the $100 level, by itself and soon.
U.S. versus the Global Scene
For the purposes
of this article, let us assume that these laws will be passed in the U.S.
They will have to come with some form of buyer ‘vetting’. Genuine
distributors to the consumer will get oil, non-consumers will get
none, or limited amounts? Should this happen, the oil price is then likely to
tumble back to the point where the price reflects the present supply and
consumer demand…or will it?
After
all, this is a global problem and there is nothing to stop a U.S.
investor from shipping out their money to a jurisdiction where such
restrictive laws are not in place. Then he can go back into oil? Will U.S.
investors follow Warren Buffet and actually look overseas for investments in
foreign lands? We think the imposition of such laws will trigger what will
grow into a financial evolution to real global investing. After all, should investment be
governed by national priorities? Politicians will argue, yes, but investors
[such as those with production facilities in China]
will argue no. It will take more far-reaching controls to give politicians
the upper hand?
But
U.S.
politicians can only control U.S.
citizens, so to control non-U.S. investors will take the cooperation of other
nation’s legislatures, something even the United Nations struggles
with? Unless the U.S.
imposes Capital Controls on such investors to prevent moving funds to such
jurisdictions, the legislation will be ineffective. But if these measures are
seen as imperative, Capital Controls will have to come too.
In
the second and final part of this article we will look at the relationship
between oil and gold [and silver] plus the effects on other markets –
currencies, stocks capital markets. This is an important article
because we are very close to these controls being imposed, and not just in
the U.S. We need to know why and what will
happen outside the U.S.
too.
Are you
and your investments effectively structured to avoid the pernicious effects
of Capital and Exchange Controls?
Subscribers, contact us for our help concerning these controls: gold-authenticmoney@iafrica.com
This
is just a snippet from the most recent issue from our weekly newsletter:
For
the entire report, please visit www.GoldForecaster.com
Contact us
at: www.GoldForecaster.com or direct
at gold-authenticmoney@iafrica.com.
Julian
D. W. Phillips
Gold/Silver Forecaster – Global Watch
GoldForecaster.com
Please subscribe to www.GoldForecaster.com for the entire report.
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