Blue Gold

One of my favorite sites on the web is the Financial Sense Online site run by Jim Puplava. Jim has been posting articles on the precarious state of our economy for many years, and his articles are detailed, thorough, and convincing. Note: this is considered by many to be a "Gold Bug" site, and by virtue of that not worthy of serious consideration. But Jim is far from a raving conspiracy nut. This article, Blue Gold, is a well researched investigation of the state of water resources both here and around the globe, and why water is not a resource to be taken for granted.

There are many things in life that we take for granted. We expect to turn on a switch and the lights to go on. When we turn on the faucet, we expect water to flow. Whenever we are hungry, we expect the grocery shelves to be stocked and we expect to be able to fill our tank with gas whenever it needs filling. These things we take for granted are life’s necessities. Our lives need food, water, and energy to function. We expect them to be there and we give them very little thought until we have difficulty getting them. Occasionally, Mother Nature reminds us just how precious these natural resources are. Standing in line to fill your tank after a storm has shut down energy production in the Gulf of Mexico, walking into a grocery store to find stock shelves empty ahead of a hurricane, or securing water rights for farm land or a city in the midst of a drought are subtle reminders of just how precious these resources have become.

For the last two decades the U.S. and the rest of the world have invested very little to develop and secure these necessities that are so casually taken for granted. Energy, water, base metals forests and farmland have all been ignored by the financial markets. Bull markets run in cycles lasting 20-25 years. They are the product of supply and demand imbalances. The declining prices that accompany bear markets lead to a scarcity of new investment. Capacity shrinks, the industry consolidates and new investment dries up leading to decline. In the last two decades no new refineries have been built, very little has been spent on building new pipelines or power plants, building new mines, developing new cocoa or sugar plantations, or developing water infrastructures. Productive equipment in these areas have gone into disrepair, deteriorated or been cannibalized, scrapped, or shut down. The mining and energy industries are suffering from a shortage of qualified geologists and engineers. Who wanted to go to college and study geology when there were fortunes to be made on Wall Street or in Silicon Valley? The natural resource industry is suffering from a dearth of qualified personnel.

As a result of this lack of investment, we face shortages in several key commodities. The balance between supply and demand is out of whack again and it will take more than a decade to fix it. Inventory levels of major commodities are down across the board. Gold and silver are running multi-decade deficits, oil and gas are getting harder to find and water tables around the globe are dropping dramatically. We seldom think about these necessities unless prices suddenly spike. While energy and the sky-high price of oil and gas has captured headlines, water will shortly move front and center as the cost of procuring it becomes more difficult and our existing water infrastructure breaks down. As we begin this new century, a global water crisis could threaten the security, stability and the environmental sustainability of the developed and developing world. The looming water crisis will affect all nations. Without an adequate supply of clean fresh water, human development is stifled.

Read the whole article, it is well worth the time. Such straight shooting is out of favor today, seen as alarmist and overly pessimistic, especially among conservatives. Unfortunately, conservatives have been given over to a goofy kind of permanent optimism once reserved for progressive utopians of the left. I recommend a frequent visit to the Financial Sense Online site if you feel yourself coming down with this affliction.