Why Gold’s Base Price Should Be North Of $2,000

Even though present Geo-political events in Iraq have now pushed up the price of gold due to Brent Crude hitting a new high in 2014, the value of the yellow metal relative to oil is still way below its historical average.  Currently, the price of Brent Crude is trading at $113.35, while gold is at $1,275.  This is an embarrassing 11.2 to 1 ratio…. thanks to the manipulation by the Fed and member banks.

If we look at the table below, we can see the average Gold-Oil Ratios for the past 5+ decades.  When the U.S. Dollar was backed by gold, the average gold-oil ratio during the 1961-1970 period was 20 to 1.  Which means one ounce of gold could purchase 20 barrels of oil:

Gold vs Oil Ratios & Price Values

Even though gold reached $850 in 1980, we can see that the gold-oil ratio for the 1970’s decade fell to 16 to 1.  The reason for the decline in the gold-oil ratio during the 1971-1980 period was due to the price of oil skyrocketing in response to the U.S. oil embargo as well as a peak in domestic oil production (1971).

Very few people today realize that the price of a barrel of oil remained at a constant $1.80 from 1962-1970…. volatility was zero as the U.S. enjoyed long-term contracts.  However, by 1976 the price of oil increased seven times to $12.80 (compared to $1.80), while gold was $124, only up 3.5 times (compared to $35) its value during the previous decade.

After Fed Chairman Volcker increased interest rates to double-digits, saving the the Dollar (1980), the price of gold declined from an average of $612 in 1980 to $350-$400 range in the 1981-1990 time period.  During the 1980’s decade the price of oil continued to decline from $36 in 1980 to a low of $14 in 1986.

Thus, the low price of oil pushed the gold-oil ratio to average 19 to 1 during the 1981-2000 period.

If we go by the price of Brent Crude which is currently trading at $113.35, we have the following values for gold:

1961-1970 (ratio 20/1) = $2,267

1971-1980 (ratio 16/1) = $1,814

1980-2000 (ratio 19/1) = $2,154

2000-2014 (ratio 12/1) = $1,360

Currently, the gold-oil ratio is 11.2 to 1, with the price of gold at $1,275.  This next chart shows clearly how the price of gold was manipulated lower in 2013 and 2014… pushing its gold-oil ratio well below the averages during the past four decades.

Gold vs Oil Price & Ratio 2000-2014

We can see from this chart that the price of gold is rising in tandem with the price of oil.  In 2012, the average price of gold was $1,669 and oil $112 a barrel, at a gold-oil ratio of 15 to 1.  Many of the brain-dead analysts on Wall Street at the time stated that the price of gold was overvalued.

That’s an interesting statement when we realize that the average Gold-Oil ratio for 1961-2000 was 18 to 1.  So how can gold at an average price of $1,669 and a gold-oil ratio of 15 to 1 in 2012 be OVERVALUED??  Hell, even at the 2012, 15/1 gold-oil ratio, it was still 3 barrels short of its previous 4 decade average.

So, today… the price of gold is $1,275 and the gold-oil ratio is 11/1.  Which means an ounce of gold today buys seven less barrels of oil than it did from 1961-2000 average (18/1 ratio).

Does that seem fair when we factor in the ongoing Geo-political events taking place in the Middle East and Russia-Ukraine as well as the peaking of global oil production?  If we take the average gold-oil ratio for the previous four decades of 18/1 and multiply it by the current price of Brent Crude at $113.35, we end up with a price of gold at $2,040…. or $765 higher than the current spot price.

So, the BASE PRICE of gold should be over $2,000 an ounce.  I say base price because this just brings the value of gold back in line with its ratio to oil.  This DOES NOT INCLUDE the huge increase in monetary printing, debt and derivatives which have funneled a great deal of value away from the King Monetary Metal.

Once we include these factors, that base price of $2,000 should be higher by several orders of magnitude.  I like to use the gold-oil ratio because it gives the public-investor a BASE PRICE to go by.  We can plainly see that the price of gold should already be north of $2,000… if it wasn’t for the continued manipulation by the Fed and Central Banks

I’ve received emails from readers who believe the Gold-Oil ratio is falling because technology is becoming more efficient.  BOLLOCKS.  While this sounds nice at face value, the opposite is the case.

In 1970, the EROI – Energy Returned On Invested in the United States oil & gas industry was 30/1.  Which means, it took the energy of one barrel of oil to produce 30 barrels for the market.  Today, that EROI ratio is down to 10/1.  Moreover, the U.S domestic Shale oil industry with a 5/1 EROI makes the situation even worse — if not dire.

Lastly, all those who believe OIL SHALE in the western part of the U.S. with a supposed resource of over 1 trillion barrels is going to save us… think again.  Oil shale with an EROI of 1.5-2/1 doesn’t pay the ENERGY BILLS… however, it’s a nice joke to share among oil geologists and engineers.

By the Fed and top banking institutions rigging the precious metals market to a low Gold-Oil ratio of 11/1, means that when the price revalues higher… IT WILL DO SO SHARPLY and painfully so for those on the wrong side of the trade or in worthless paper assets.

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39 Comments on "Why Gold’s Base Price Should Be North Of $2,000"

  1. Evil sorcerers site is down. Again.

    • houtskool,

      What site is that?

      steve

      • Beyond JW.

        • I prefer to think of it as the work of the ‘sorcerers’ apprentice’, Houtskool.

          The real ‘top line’ sorcerers have their hands full right now – conjuring up more madness in the M.E. where the Anglo-merikan empire attempts to use their ISIL/ALCIADA proxies to mess up Iraq and gain a third front from which to attack Syria…as well as draw Iran into an all out Sunni-Shiite confrontation. Then hopefully provoke a response from Russia.

          This is going to get messy. Fast. Be prepared Steve, for your gold/oil ratio to get cut by half again… as they bottom gold @1000 and spike oil to north of 200.

          My little problems are miniscule compared to that! But on a micro/macro level, it is worth noting that the attempt to draw forth an alternative narrative to the one which has ‘entranced’ the pm community for so long…

          is indeed meeting great -and effective – opposition. Messing with beyondjimwillie.blog.com is only a piece of the project – on a daily basis now the little jerk arounds occurring with everything I do online are serving to make it harder to do what I need to do…. including complete the next segment of Barbarous Reliquary! This – https://firstlook.org/theintercept/article/2014/03/12/nsa-plans-infect-millions-computers-malware/ – is essential reading for anyone who still believes that “their” computer is their own!

          It’s all a great compliment… and terrific confirmation… that my humble efforts to give fellow metalheads a ‘heads up’ on how they are being purposely set up for ruination via ye olde Leninist dialectical controlled opposition paradigm are giving the puppeteers a migraine!

          These last ditch counterattacks are but desperate attempt to control the high ground of debate… and keep western investors blind to the perils of their position… all run by the “Marmots/Marmonts of Mammon” – they will… of course… inevitably fail. A fresh wind is stirring in the ranks of metalheads no longer ‘bedazzled’ with the baffling baloney of the consensus narrative! Resistance is expected… but futile!

          As with the DUKE at Salamanca… I intend to continue lunching on my leg of chicken… whilst calmly watching for the enemy to make that fatal overstretch which will allow for the release of rouges’ well guarded reserve forces!

          • Rogue,

            You stated, “This is going to get messy. Fast. Be prepared Steve, for your gold/oil ratio to get cut by half again… as they bottom gold @1000 and spike oil to north of 200.”

            While your assumption makes sense at face value, I doubt the price of gold will fall in an oil price spike scenario you have forecasted. The only reason why the Gold-Oil Ratio was below 10/1 for a few years in the past 50, was due to oil moving up first… then the price of gold catching up.

            However, during price spikes such as 1977-1980 & 2008-2011, the price of gold rose along with the price of oil. If we are going to see an OIL PRICE SPIKE towards $200… you can bet you bottom silver dollar that the price of gold will go along for the ride.

            We must remember, the Chinese were not apart of the great physical buying in the 1977-1980 period, or were they purchasing as much during the 2008-2011 period as they are so presently. Now, we have Asia, India and many sophisticated investors buying gold.

            If the FED and Central Banks try to push gold down to $1,000… it would kill an already weakened system as there wouldn’t be any available metal.

            This is my opinion, and just like an ASSHOLE… we all have one. You are free to debate this issue, but in all honesty… I could care less. I don’t care about the short-term movement in gold and silver.

            However, that doesn’t change the fact that oil price spikes have led to price spikes in gold and silver.

            steve

          • “While your assumption makes sense at face value, I doubt the price of gold will fall in an oil price spike scenario you have forecasted”

            Actually on that point my suggestion is in line with your own conclusions about the divergence in the ratio which occurred in 2013. You point to that anomaly as evidence of manipulation. I would agree with that – although we clearly disagree on what/who has been the source of that manipulation during this period. It’s less of a forecast than a warning about relying too much on previously solid co-relations in trying to get through this next phase – of max chaos and distortion!

            As long as paper gold can maintain a market for itself, all modelling based upon historical trends is subject to failure. That’s what 2013 illustrates. So to predict the POSSIBILITY of even more extreme divergence in the short term is merely to confirm what we have already seen in these markets – all bets are off…and anything and everything is possible.

            It’s only been a couple of years since anybody who claimed gold would slip below 1600 again was treated with scorn and derision. Lots of people were not prepared mentally to accept that eventuality… and paid a heavy price for the refusal to consider variables outside of the consensus view. Even now, the few people who got their calls right are not given any great deal of credit! Ideology has proven itself stronger than reality for some… that is not really healthy for investment purposes.

            It seems to me far better to give people an opportunity to prepare themselves for what indeed CAN happen… not necessarily WILL happen… so as to be better able to stay the course. Might save a lot of tears. Too many pundits, using charts, ratios, and ‘historical patterns’ have been proven wrong too many times to expect folks to go back to the well again and again. At it’s core, your EROI thesis DOES NOT need rely upon those formulas to be substantiated… the beauty of it’s simplicity is in the measurement of calories expended for calories extracted… everything on top of that equation is more or less speculative.

            Finally, when gold inevitably rises, the role and situation of the Indians, Chinese, etc. may prove far different than what people in the western world might suppose!

          • Rogue,

            I agree, that the pundits with their CHARTS, GRAPHS & RATIOS have been proven wrong too many times. However, energy drives the cost of production. Why is gold and silver rising as the other metals such as platinum, palladium and Rhodium decline?

            Again… I really could care less in the short-term. But I would still believe the price of gold and silver would rise along with a price spike of oil to $200.

            steve

    • O, Steve, be prepared for a long fight. The fundamentals fight is the fight that is being attacked most as we speak.

  2. Steve, a point of contrast when speaking of valuations measured in barrels.

    1 US bbl of oil = 159 liters
    1 liter of Aquafina drinking water cost $1.69
    Therefore, 1 US bbl of water cost 159 X $1.69 = $268.71

    Oil trading less than half that price. With the gold/oil ratio at ever lower valuation?

    Price manipulation? Gee! Ya think so!!

    • DaleFromCalgary | June 13, 2014 at 6:34 pm | Reply

      Aquafina isn’t sold by the barrel. It is sold in small bottles, so a large proportion of its cost is the plastic bottle, filling the bottles, stacking them on pallets, transporting them to stores, and then breaking down the pallets and stacking the bottles by hand onto the store shelves or into the coolers. A lot of energy use is tied up in those water bottles, hence the high cost. The energy cost is far higher than the value of the water.

      My residential water bill is pennies per litre because transport costs are minimal via a pipeline system and treatment plant facilities. If people had to pay for bath water or lawn water delivered in bottles, one can imagine the cost! And, sad to say, in many parts of the world that is the only way the poor can get clean water.

      Bottled water is an excellent example of our berserk economic system

      • Dale, I totally agree. I raise the price contrast just so we may point out just how “berserk”.

  3. Please don’t take our diminishing fresh water lightly, I believe it will be the next Big Thing ! Imagine what you’d be willing to pay or do for it were you to run out. Were I paranoid I might connect the dots of which large corporations pollute our water the most and which are currently investing in large purification and desalination plants. Just a thought could the pollution of the aquifers (fracking,etc. etc.etc.) be contrived for future profit ? No matter, it ends the same, not enough fresh water.

  4. Clearly the price is lower than what you’re calling the BASE price relative to oil. However, there is certainly some lower price at which a brick wall of reality is hit. Some price at which the laws of physics do not allow it to dip below. Some price at which we’ll never be sitting there asking “how does it go lower than this?”

    As far as the base price, shouldn’t that be the price it would take to cover the currency currently in existence? Maloney and others have made estimates of like $10 – 12 K per oz and this was about a year ago.

    • Rojelio,

      Yes, I understand what Maloney, Rickards, Sinclair and others have stated about the revaluation price of gold to back the currency. While this is a good theory, it still does nothing to solve the PEAK OIL problem. I am not against a revaluation to back existing paper currency, however the problem goes much deeper than that once we factor in the huge amount of DEBT & DERIVATIVES.

      I did the post to show the reader just how undervalued gold is to oil historically even with a FIAT CURRENCY, HIGH DEBT & DERIVATIVE SYSTEM. So, gold should be trading close to $2,000 just on that ratio alone.

      steve

  5. Robert Happek | June 13, 2014 at 10:56 pm | Reply

    I am surprised that Steve failed in his analysis to take into account one basic fact about the relation between oil and gold. Oil is a depleting asset, that is, with every passing minute, the total amount of oil above and below ground is diminishing due the fact that we burn it constantly. Once burned, it is gone forever and it can not be recovered. That is one consequence of the laws of thermodynamics. Gold on the other hand, is an accumulating asset. We mine it in order to accumulate it. The total amount of gold above ground, presently at roughly 170,000 tons, is increasing every day by roughly 7 tons. Gold above ground will not continue to increase indefinitely, but certainly for at least another 100 years.

    There is another important difference between oil and gold. We need oil to survive (no food in the store without oil), but gold is not needed for survival. People can get married and produce babies without golden wedding bands.

    So the question is: Will the last barrel of oil pumped out of the ground be valued in terms of gold in the same way as the first barrel of oil ever pumped? I do not know what the correct answer is, but I could imagine that the last barrel of oil will be worth much much more than the first barrel. People will trade their precious metals for any amount of food before they starve to death. Contrary to Steve, I bet on a declining oil to gold ratio in the future. That decking oil/gold ratio is, in my opinion, a logical consequence of the declining EROEI ratio in future oil production.

    • A compelling and well-crafted argument. Kudos!

      Were it not for this – “We need oil to survive (no food in the store without oil), but gold is not needed for survival. People can get married and produce babies without golden wedding bands” –

      one might be forced to concede the field. However, your quote highlights the very nature of the magic show which has for so long been a forced substitute for the ‘really real’ ….

      “We” do not need oil to survive… any more than ‘we need’ stores in order to have food. “They” need “us” to believe that ‘we need’ their monopoly-controlled products and systems. These fictions will run dry even before the supply of oil! “We” will be producing crops, harvesting nature’s bounty, running our necessary appliances and machinery on ground level energy sources purposely pushed aside or made ineffective by the current con in effect.

      “We” who intend to be around after the coming storm will have adapted to the best of old and new technologies with that flair for survival that was common to our ancestors, but increasingly bred out of their descendants today. Oil is a cargo-cult… officiated by the priestly caste of the moneychangers… foisted upon the barbaric remnants of a dead culture they called ‘consumerism’

      … the future primitive will look back on that curious interlude in humankinds’ journey as a cul-de-sac inexplicable in it’s attraction!

      • and what will the producers (think Saudi Arabia or Russia) that sells at a very nice profit at 200$pb do with those excess fiat dollars? If only a fraction of those proceeds go into physical gold as savings (and they already are, so this will happen, it’s already started) then watch in awe. We’re not there yet, but it’s coming.

    • People can be irrational in spite of evidence of pending doom. For example, Easter Islanders exhausted their resources—and population—while accumulating statues to the very end.

    • Robert Happek,

      Actually, I didn’t fail to consider that issue. Matter-a-fact, I have reflected on that very relationship for quite some time. Even though oil will peak and decline, I believe it will be instrumental in pushing the values of GOLD & SILVER higher than you realize.

      We must remember, there are nearly $100 trillion in Global Paper Conventional Assets under management. Furthermore, there are TENS of $Trillions in outstanding Govt Bonds as well as Corporate Bonds. In addition, we have the global Real Estate Market. All of these paper and physical markets will lose value in a peak oil environment.

      It is my contention, that when the world wakes up to the fact that it has invested in the BIGGEST PONZI SCHEME in history, the funneling of funds into physical assets (to protect wealth) such as the TINY GOLD & SILVER MARKET will push their values to high levels even as the global oil supply declines.

      steve

      • Steve, Re: Wealth protection,

        This is now occurring around the globe at an ever increasing pace, causing real, physical, tangible asset prices to sky rocket. One need only look at the recent global auction market.

        Jewels, gems, art, automobiles, real estate, farmland, etc. All have fetched final bids at very high valuations. Some in the many hundreds, of millions of dollars. This is wealth seeking protection.

        The very high net worth individuals know what is coming and are fleeing the paper ponzi scheme as quickly as possible. All now have a safe, well guarded location in which to ride out this coming global storm of epic proportions.

        I say the above not to unduly alarm, but to open peoples eyes to what is coming.

    • This is an interesting point of view regarding the gold/oil ratio. However, please consider that oil consumption goes down when the cost of oil goes up too fast which serves as negative feedback to some degree on the rising price of oil. Gold’s most significant purpose is its use as a monetary asset and, as you noted, it is not needed for survival. As such, gold mining should decrease when oil becomes too expensive in terms of currency or gold (oil is needed to mine gold). Thus, even considering your assumptions about the accumulation of above ground gold and declining oil production due to peak oil, the gold/oil ratio should remain stable and could become even higher than historical averages given the likelihood of decreased gold mining (without gold increasing relative to oil) due to an increased cost to mine because of higher oil cost. Moreover, in the event of devaluation of the dollar or very high inflation, gold will likely serve as a hedge against such devaluation and the gold/oil ratio may become significantly higher than the recent historical average.

  6. Good morning,

    just a quick pondering: How has gold production developed during this time period? We know that we are near the peak oil but are the miners producing more gold to allow these lower prices? And restless Middle East means that oil supply lines may be disrupted but its not so significant for gold flows. The question is, when will we achieve peak gold?

    • Esko,

      Please check out my article on the subject of HIGH GRADING in the Top Gold Miners:

      https://srsroccoreport.com/top-4-gold-miners-average-yield-declines-even-with-high-grading/top-4-gold-miners-average-yield-declines-even-with-high-grading/

      Even though several of the top gold mining companies resorted to high-grading some of their mines, total output year-over-year is about the same while the average yield of the group declined a bit. This was due to Barrick’s average yield falling considerably in Q1 2014 compared to Q1 2013.

      I believe we will see PEAK GOLD soon after the world experiences PEAK OIL. We are still in a plateau of Global Oil Production as Shale Oil and Tar Sands kept the 5-6% world annual decline rate at bay…. however, I think we start to see declines within the next year or so.

      Once the world realizes we have indeed HIT PEAK OIL… watch as global gold and silver production peaks and declines soon afterward.

      steve

  7. TO READER KAI,

    Kai, I just wanted to let you know I received a contact email from you via my website, however, I tried to respond and the email was returned… looks like that email address did not work. Please contact me again with another email address and I will reply.

    steve

  8. According to Martin Armstrong:
    Gold began the bounce on target but we need a daily closing ABOVE 1295 to suggest any further upside pressure. The low was on June 2nd so technically we have fulfilled the first target in time for a June seasonal low. We would need a weekly closing above 1355 to really suggest a brief sustained rally is possible while resistance is starting at 1307 on our weekly models.
    The current bounce is due to the shift in currencies. Keep in mind that for a real bull market to form long-term gold must rise WITH THE DOLLAR. Only when it rises in all currencies will we see a bull market. We can see in Euros, the December low is the major low while in dollars we have a double bottom.

  9. Steve, you wrote:

    “This is my opinion, and just like an ASSHOLE… we all have one.”

    What you failed to mention is that what comes out of some assholes is watered down crap, and from some other assholes comes nothing of substance at all. Fortunately, out of some assholes, like yours, comes pretty good shit, and that’s why I enjoy your site so much!

    That’s my brain fart for the day (apologies for conflating metaphors)

  10. Life as we know it is a leveraged derivative of oil. Without any legitimate substitute for light sweet crude Our whole way of life gets rehypothecated just that much more with every drop of the underlying collateral (oil) that gets burned.

  11. Steve,
    “Palladium dropping while gold/silver rising”? Hasn’t Palladium been the best performing of PMs late?
    regards

  12. wow, rogue is trying to predict a lowball target of gold price just like the infamous armstrong!

    is roguefraction armstrong’s shadow?

    rogue, can you be honest? do you even trade gold/silver futures? if not, stop predicting something you don’t have any idea about!!

    gold bottom last june! silver is completing a triple bottom. mark my words. because i do trade gold/silver futures!

    • Unlike yourself, I’ve made no predictions here. I have given fair warning to investors to ‘be prepared’ for ‘anything and everything’ that can… and may happen…no matter what ‘model’ is used to forecast a set result.

      If you cannot distinguish the difference between the two, it might be wiser to bow out of any further botched attempts to re-interpret others’ remarks… and concentrate upon refining your own – to the point where they offer something more than comic relief. I don’t need to trade in paper to be able to absorb and interpret information relevant to what drives the pog. Holding physical makes me actively seek out and acquire facts that persons like yourself seem to run and hide from… to each their own!

      If trading is your thing, I suggest you just stick to it, and limit your free advice to those who request it of you! But I do appreciate your associating me with Martin. While I do not buy into his computer knows all thing… his calls of the last 3 years have left everybody else in the dust. Since it seems to be YOU who is making the predictions here… lets wait and compare your record with his in a little while, shall we?

      Oh… and BTW… Armstrong makes a point of continually emphasizing the need to look at the pog in ALL the different currencies. Can you be honest? Do you EVER pay attention to what ANYONE ELSE says… or just float through your virtual universe in search of diversion from the joyless burden of being a caricature of the cult follower?

  13. i think the gold community is underestimating how much gold is consumed every year in electronics and eaten by indians in gold leaf.

    but forget about gold, let us all focus on silver, which has been consumed much much faster than oil!

  14. armstrong fails to metion gold price in RMB! why??
    because gold price in RMB is showing very clearly a line in the sand. june and dec. of 2013 were double bottoms!

    any dip below 250RMB/gram should be bought!

  15. Thanks for logical analyzing of the precious metals markets. I only have one comment …It does not matter what it should be…as ALL MARKETS are manipulated and contrived by TPTB. Once they lose control, which will happen the pendulum of natural markets will swing way beyond the reasonable into the absurd valuations for the precious metals. At that time you should be willing to sell and purchase other assets that will provide income and financial stability for your family.

    • MM,

      Yes, it’s true that ALL MARKETS are manipulated. However, some are manipulated HIGHER while others are pushed LOWER. While I do agree with you that when the markets finally RESET back to fundamentals, the value of gold and silver could reach crazy heights. Although, I disagree with you that investors should sell gold and silver to purchase other assets that will provide income or financial stability.

      In a PEAK OIL SCENARIO, most paper assets as well as physical assets such as Real Estate will continue to implode. It might be wise to sell some of one’s gold and silver to purchase things or certain investments, but I would argue that it will be wiser to HOLD ONTO precious metals as the value of most assets will continue to decline.

      steve

      • I am not saying one should sell ALL precious metals but creating an income stream will be of paramount concern as opportunities for generating income will be reduced. I have allocated a reduction of 30 percent of my precious metals for the acquisition of farmland, farm equipment (manual and mechanized), building materials, tools, new entrepreneurial endeavors and educational materials for my children. The rest will be set aside to deal with the shortages and restructuring of society as we emerge from the darkness.

        Do not get me wrong.Precious Metals is one of the most manipulated if not the MOST manipulated markets utilizing the value of those assets at their peak or near peak at a time when many asset bargains abound is the best use of the precious metals.

        I believe in cycles and getting ahead of and on the ground level of the next financial cycle using the precious metals will ensure that my prodigy thrives in the tumultuous times ahead.

        • MM,

          I totally agree with you that buying farmland, tractor and other equipment for farming or a more sustainable lifestyle is very wise use in selling precious metals. However, I believe the BUSINESS CYCLE as we know it…is DEAD.

          Just think of the Roman Empire collapsing. Once the Empire started to collapse, there was no coming back… NO BUSINESS CYCLE.

          steve

          • Wow…great though that the business cycle is DEAD….I honestly never thought of that possibility…thus I need to reconsider several of my plans.

            If the opportunity for business is not available then I guess I will have extra PM’s available.

            Are there any books or materials that I can read/study that will help me to understand the Post Roman Empire society……..

            THANKS STEVE :}…once again you have helped me think outside the box.

            Keep up the excellent work!!!!!!

          • This post should be read after the ‘MM says: June 16, 2014 at 1:22 pm’ which doesn’t seem to have a ‘reply’ option.

            MM, I am not sure that reading a history of 3-400AD will help you much but the name of the times being the ‘Dark Ages’ should be a hint.

            In the case of the Roman Empire, when the pay stopped most of the armed forces just went home to their farms and villages (no chance now) and the world became much more localised with marauding tribes rather than armies.

            Now populations are larger with densities much, much greater whilst local food production is much lower. Combine that with fertilizer restrictions (due to Peak Oil) reducing crop yields. (liquid fertilizer should be high on your list)

            A 1000 years later, when empires ended the host country stayed intact but suffers severe loss of wealth (on loss of its reserve currency status) whilst another empire stepped into the breach to at least maintain a degree of international order. But that didn’t extend to within the empire’s host’s borders and generally took years. Nowhere in history (apart from the movies) is there a hint as to what might happen when a depression hits a (well armed in the US) population getting a large amount of FIAT state funds (social security, pensions etc). With HFT and instant communications worldwide it will be quick.

            As Steve says, the business cycle is dead, corrupted along with most other cycles based on the past.

            I am not sure how, at a time of uniquely aggressive state interference in stock/bond and PM markets, the ‘chartists’ don’t realize that there is a really high chance that part of that manipulation of the market is aimed at producing the ‘correct’ conclusions from their models? They, like most journalists, don’t seem to want to dig below the surface, into the reality of seemingly irrelevant data.

            Here, we have the luxury of Steve joining the dots for us, ramming into us the importance of EROI and the significance of Peak Oil, whilst on the sidelines there is Rogue, in his unique way, making us think and draw our own conclusions. If this blog disappears we know it really is too close for comfort.

  16. Peak oil and the infinite growth monetary paradigm

    http://m.youtube.com/watch?v=k-Ejg8zd8pI

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