Labels Are Meaningless

labeling-people photo

Alt right, hard left, SJW, influencer, gender neutral, trans gender, queer, vegan, hipster, bi-polar, activist, eco-fundamentalist, post-modernist, hippy, rocker, mod, socialist, capitalist, liberal, radical, anarchist, feminist

Please.

Give me a break.

I don’t know what any of these labels mean.

They mean nothing to me.

Would you like to know what does interest me?

I am interested in who you are as a person.

I am interested in what you have to say.

I am not interested in your identity.

I am interested in the true and authentic substance of you.

I am interested in your heart.

I am interested in your mind.

And I am interested in your soul.

 

By Nicholas Peart

(c)All Rights Reserved 

 

Photo source: harikalymnios.com

Could Copper One Day Become A Precious Metal?

copper bullion

Copper is an important and much needed commodity. It is classified as an industrial metal. However, what if at some point in the future it became scarce enough to be reclassified as a precious metal?

Such a scenario seems inconceivable at this stage. After all copper is much more abundant than precious metals such as silver and gold. Most view it in the same light as other industrial heavy weight commodities such as iron ore or crude oil; fundamental resources in the movement, development and growth of the world.

Much of the world’s copper sources are also concentrated in just a few areas of the world most noticeably in Chile, which is the world’s largest copper producing country. Peru is the second biggest producer of copper followed by China and the USA. In 2018, the total global production of copper was 21 million tons. By comparison in that same year, the total global production of usable iron ore was 2.5 billion tons. For aluminium it was 60 million tons, for nickel it was 2.3 million tons, for lithium it was 85 thousand tons, for silver it was 27 thousand tons, and for gold it was 3.26 thousand tons.

A United States Geological Survey (USGS) global assessment of copper deposits around the world conducted in 2014 stated that there contained 2.1 billion tons of copper resources (note resources and not reserves) discovered under the ground while the number for ‘undiscovered resources’ of copper came at 3.5 billion tons. As of 2018, total global reserves of copper were 830 million tons. 

In 2018, total global reserves for the following commodities were as follows…

Iron Ore: 170 million tons of ‘crude’ ore reserves containing 84 million tons of iron reserves. *However it should be noted that the total amount of identified iron ore resources under the ground currently stands at 800 billion tons of crude ore resources containing 200 billion tons of iron resources. 

Aluminium: Global resources of bauxite (from which aluminium is extracted) are estimated to be between 55-75 billion tons.

Nickel: 89 million tons. *Total global resources of nickel are currently identified at 130 million tons 

Lithium: 14 million tons. *Total global resources of lithium are currently identified at 62 million tons

Silver: 560 thousand tons. *Silver is primarily extracted as a by-product mostly from lead-zinc mines, then from copper mines and then thirdly from gold mines 

Gold: 54 thousand tons.

So in light of all my findings, could copper one day become a precious metal? In my view, this is unlikely to happen anytime soon. Even if there is a growing demand for copper, the fact is, compared with silver and even other industrial metals like nickel and lithium, there is simply an abundance of copper. The current total global copper reserves are nearly ten times greater then the current total global nickel reserves and over a thousand times greater than the total global silver reserves, never mind gold.

Still, copper is aesthetically a very attractive metal and I rather like the novelty value of owning a few pieces of copper bullion. You can often buy a 1kg bar of copper via most bullion dealers for a very modest sum and the German bullion company Geiger Edelmetalle has a number of copper coins and bars you can buy from their online shop.

However, if you wanted exposure to copper in your portfolio, as with other industrial commodities such as iron ore, crude oil or aluminium, you are better off investing in blue chip mining stocks such as Rio Tinto or Antofagasta, which produce a lot of copper. What’s more, both companies also pay a dividend. Alternatively, you can invest in a copper ETF, where you have direct exposure to the copper price, but without the added stress of having to worry about factors such as company mismanagement or political issues when investing in copper related mining companies.

Both these options are far more practical than owning physical copper, which is just not feasible at current prices if one wanted to accumulate a large position. Even accumulating a growing stack of physical silver at its current prices can incur high storage costs if you wanted to store it with a reputable bullion dealer.

By Nicholas Peart

(c)All Rights Reserved

 

 

 

SOURCES/FURTHER READING

Main USGS link for commodity stats…

https://www.usgs.gov/centers/nmic/commodity-statistics-and-information

 

Copper production 2018 link…

https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/s3fs-public/atoms/files/mcs-2019-coppe.pdf

Iron Ore production 2018 link…

https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/s3fs-public/atoms/files/mcs-2019-feore.pdf

Aluminium production 2018 link…

https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/s3fs-public/atoms/files/mcs-2019-alumi.pdf

Nickel production 2018 link…

https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/atoms/files/mcs-2019-nicke.pdf

Lithium production 2018 link…

https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/atoms/files/mcs-2019-lithi.pdf

Silver production 2018 link…

https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/atoms/files/mcs-2019-silve.pdf

Gold production 2018 link…

https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/s3fs-public/atoms/files/mcs-2019-gold.pdf

The Plato’s Cave Of Identity

identity image

It is so easy for one to become trapped and stand too close to the picture. In this instance one becomes myopic to their greater surroundings. When I think of identity I think of a tangled red tape maze of labelling and a neglect or disconnection to a more meaningful unifying permanency.

An important question one must ask is, ‘Who Am I?’.

Do I define myself by my race, social class, nationality, politics, culture or subculture, my external looks, fashion style etc ?

Or do I transcend any of these superficial identities and connect more with my heart, mind and soul?

In a more universal context, identity has no currency or power. The matter and energy in the universe is bereft of any labels or boxed confinement. It is that and nothing else.

For example, when I refer to myself as an artist, I am already putting myself in a box by creating an identity. I would severely limit and sell myself short if I were to solely think of myself as an artist. With my paintings, I strive to transcend identity. The inspiration for my paintings derives from what I like to refer to as ‘the eternal source’. By this I mean an eternal spirit or consciousness, which is permanent and will outlive me. I find it a challenging task to explain this in words, hence why I create the paintings I create. Through my paintings, I project and get closer to this eternal source much more than I would through words.

I believe focusing on identity creates a great deal of unnecessary anxiety, stress and friction. We become like spread-out and jagged fragments of broken glass; sterile and running on empty.  We become our own worst enemies.

When we drop identity, the concept of something such as likes and dislikes melts away.  We become more in tune, connected and empathic to our greater surroundings. We become more, dare I say, enlightened.

By Nicholas Peart

(c)All Rights Reserved

 

Image source: Pixabay

THE TRUE SINGULARITY: A Universe Of Unlimited Abundance And Eternal Harmony

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The Singularity is a term referring to the point when Artificial Intelligence (or more specifically Artificial General Intelligence) will be at the same level as human intelligence. I feel that the term is often misunderstood and many people find the prospect of this dystopian and dehumanising. Technology has already changed our lives in unprecedented ways. When I think of technology, I don’t just think of hardware or software. For me, technology means problem solving or finding a much needed solution to a glaring limitation. When seen through this lens, it is clear that technology enhances and assists our lives. The world is much more connected then ever before and we have many applications (most of which are free) at our disposal to help us save time and money.

The beginnings of the first industrial revolution in the 18th century, via the inventions of the steam engine, spinning jenny and power loom, dramatically reduced the number of hours traditional labourers worked. This period was an unprecedented gamechanger in the evolution of humanity. Then the invention of the railroad, the development of an advanced network of roads, the move from the horse and cart to the automobile, the invention of electricity and the lightbulb negating the need for candles and oil lamps, the invention of the aeroplane, the invention of the radio and the telephone, and then the television and later the internet; the invention of all these things created solutions, made our lives easier, saved everyone time and money and enhanced the connectivity of the world.

For some, the Singularity is solely based around this concept of AI matching human levels of intelligence and the potential end of the human race. What many forget to understand are all the benefits of AI. Instead of this doom and gloom future, I see the continued development and enhancement of AI contributing to a more prosperous and peaceful world. I believe that technology via AI will make all jobs obsolete. A Post-Work society is unavoidable. Many people worry about such a situation and its perfectly understandable. Yet they are worrying about it from the limited paradigm of our current economic model of global capitalism. Lets try to view the bigger picture. What if technology became so advanced that it were to, by default, make economics and money obsolete? In a world where nothing is exclusive and all physical goods and services are unlimited and at zero cost, since technologies such as 3D/4D Printing, AI and data creation and mining, Nanotechnology, Genetic Engineering and Robotics would have contributed towards making such a world like this a reality.

In today’s world, most people’s primary worries are economic. Followed by their physical and emotional wellbeing. Followed by their hopes, dreams, desires and ambitions. A world of an unlimited abundance of everything at no cost would take care of our economic worries. A common worry of such a post-work Singularity future is how a lot of people who always had jobs would begin to develop serious psychological problems since much of their identity was always traditionally defined by their job. Yet when I envisage the Singularity and super advanced AI, I also believe that by that time every single cell in the body of each one of us will be completely understood at the most minute level. Each one of our bodies will be like smart data machines with highly advanced algorithms continually keeping track of the entire physical and emotional health of our body, and enabling us to maintain perfect optimum health via the nano-signalling and detection of decaying cells and any irregular and abnormal behaviour in our nervous system. Nobody would ever become ill or develop serious illnesses such as cancer. Our bodies will be merged and upgraded with technology. The latest AI developments will be merged in our own bodies. Everyone will be a SMART hyperconnected entity. And I would even go as far as saying that this would negate the need to eat, drink, sleep, experience temperature fluctuations or fatigue. Our consciousness and memory would be preserved, stored and enhanced. Yet all the limitations and shortcomings of our physical sensations would be transcended by technology. This technology won’t numb us or kill our empathy (I would even argue that it will augment our empathy and consciousness in unprecedented ways), but it will protect us from many mental health issues, which currently affect so many people around the world. Mental health will cease to be invisible as it is today and will be just as clear as our physical health. There will be no chasm between the two. 

Furthermore technology extends to providing solutions to bigger issues, beyond paving the way for transhumanism and a post-work and post-capitalist society. Climate change and global environmental pollution (such as air, land and sea pollution) can all be reversed by technology. Technology has the power to eradicate all the plastic and polluting debris in our oceans. Technology has the power to purify the air in large cities. Dare I say technology even has the power to replenish and restore the environmental balance of the world.  One day technology will enable humanity to be an interplanetary and intergalactic species.

In short, technology has the power to create solutions to all our current problems we experience today. It is easy to be cynical and look at how technology can also be destructive but if we are looking at technology in all its totality in providing solutions to all the most pressing struggles and limitations faced by many, then a post-work, post-scarcity, limitless, prosperous, and a perfectly level and peaceful world is more than achievable.

 

By Nicholas Peart

(c)All Rights Reserved 

 

Image: acekreations

Insurance Assets In A World Of Rising Uncertainty

bitcoin-and-gold

‘Todo es posible nada es seguro’. These words came from the lips of a fellow local passenger during a hair raising bus trip through the narrow winding mountain roads of the Andes in Peru many years ago. Yet they could be applied today to the current state of the whole world.  When I try, as hard as I can, to envisage the global landscape over the next 10-20 years, I realise there may be a stronger case than ever before for holding insurance assets or Off-The-Grid Assets (OTGAs)©. These are defined as assets that not only act as a safe haven or store of value during a major economic crisis, but are not directly connected to the global financial system. Central banks cannot control their supply or price nor can they create more of them.

There are two principle categories of OTGAs. The first and most obvious category are precious metals. Gold, silver, platinum and palladium would all fit the bill. They are as old as the hills and are finite in quantity. Even though there exists quantities of these metals yet to be mined, their quantity cannot be enlarged as easily or cheaply as that of fiat money.

The second category of OTGAs are premium grade supply-capped cryptocurrencies (PGSCCs)©. This category is limited only to a handful of cryptocurrencies which are both of premium grade and a store of value. By ‘premium grade’ I take into account factors like trust, reputation and adoption. And by ‘store of value’ I mean that a cryptocurrency has a finite and capped supply. Bitcoin is, by far, the principle cryptocurrency and it should represent at least 50% of a cryptocurrency portfolio. It is the oldest cryptocurrency, has a supply cap of just 21 million coins, and its current value represents at least 50% of the entire global cryptocurrency market. Only two other cryptocurrencies make the cut as a PGSCC. They are Litecoin and Z-Cash. Litecoin is one of the oldest cryptocurrencies and has a supply cap of 81 million coins. Z-Cash is a more recent cryptocurrency established in 2016. It is very similar to Bitcoin with the same supply cap yet unlike Bitcoin it has the additional option of being a privacy coin. Monero is a pure privacy coin yet Z-Cash has a better reputation. The second largest cryptocurrency, Ethereum, is not a PGSCC since it does not have a supply cap.

Although there are a lot of unsavoury people and entities operating in the crypto space, one of the few important crypto related organisations is the Gemini exchange founded by the Winklevoss brothers who both have an enormous personal stake in Bitcoin. This is arguably one of the most, if not the most, trusted and safest cryptocurrency exchange currently in existence. Gemini also offers the option of insuring any cryptocurrency holdings on their exchange. Unlike other cryptocurrency exchanges, only a very selective number of cryptocurrencies can be traded on their exchange but these include all three PGSCCs; Bitcoin, Litecoin and Z-Cash.

Precious metals in bullion form can be stored and insured securely in the vaults of reputable dealers such as Sharps Pixley. This works very well if you have large quantities of gold which is currently trading at over $1400 per troy ounce. However for cheaper precious metals like silver, storage and insurance becomes more costly. Precious metals only count as OTGAs in physical coin and bullion form. Precious metal ETFs or shares in gold and silver miners are not OTGAs. In the case of PGSCCs, they become true OTGAs when they are kept in cold storage on a hard drive in a secure location and not all on a cryptocurrency exchange where they are then vulnerable to hacking attacks.

Land and edible commodities like crops are not OTGAs for the following reasons. Land is highly illiquid and carries the added risk of expropriation if a tyrannical government ever came to power in its jurisdiction. Edible crops, on the other hand, are much more liquid yet they are perishable. Even tinned foods with a longer shelf life do eventually perish. Precious metals and PGSCCs are immune from these limitations.

Precious metals and PGSCCs each have their own unique advantages. The most obvious ones for PGSCCs are the negation of physical storage costs and cross-border transportation hurdles, and of course their finite supply caps. Since PGSCCs are digital assets, unlike precious metals, one doesn’t have to worry about physical storage or transporting them between borders. They can be stored in digital wallets either on a cryptocurrency exchange platform or in cold storage on a hard drive. Even though precious metals are rare, their supply is not fixed and who knows how big potential deposits of gold and silver are not just on this planet but on other asteroids and planets throughout the solar system. It is entirely possible that at some point in the future asteroid mining could dramatically increase the current supply of these metals. Yet whether this occurs in my life time is debatable.

The advantages precious metals have over PGSCCs are their tangibility and lack of need to be powered by electricity and by extension the internet. What’s more, precious metals have been around for thousands of years whereas Bitcoin has only been around for ten years and it still remains to be seen whether Bitcoin will endure as a store of value in spite of its unique advantages and current position as the dominant and leading cryptocurrency.

Yet we are currently living in a world of ballooning public and private debt and high equity valuations fuelled by low interest rates and quantitative easing. At the same time levels of inequality have risen along with a palpable sense of discontent across the world bringing with it an emergence of populism and radical parties and politicians. The final paragraph from a recent short article entitled How I Learned To Love Gold by Alasdair McKinnon, who manages an investment trust in the UK called The Scottish Investment Trust, is very succinct and prescient in describing this current environment and its future consequences…

Today, we are more than 10 years into a monetary experiment that ‘saved the system’ but is losing popular consent. Cheap money has driven asset prices but has increased wealth inequality, especially between generations. Demographics dictate that, in the not too distant future, those without assets are likely to be running the institutions and making the rules. In the interim, a new breed of politician is prepared to rip-up the economic rule book in their quest for power. This shift won’t necessarily prove a bad thing but, regardless, it seems a favourable environment for gold.

Such a situation is likely to manifest in the future and would create a very favourable environment not just for gold but for all types of OTGAs as more people lose trust in owning devalued fiat currencies and worthless government bonds.

 

By Nicholas Peart

(c)All Rights Reserved 

 

 

 

Reading/Sources

How I Learned To Love Gold

 

 

Image: http://www.birchgold.com

TARGET2: The Payment System That Keeps The Euro Going

euro-coins-and-banknotes

TARGET2 is the Eurozone national and cross-border payment system, which is used between Eurozone National Central Banks (NCBs) to settle transactions in Euros. It is little known to the general public but it is a very important component of the Eurozone financial system and in understanding the credit surpluses and deficits between the NCBs of each Eurozone country.

A simple and easy-to-understand way of explaining how this system works is featured in the following article here. Taking the example of two eurozone countries, Spain and the Netherlands, a Spanish tourist from Madrid travels to Amsterdam and has a 100 euro meal at a restaurant over there. Now if he had the 100 euro meal at a restaurant in Madrid, his bank in Spain would debit 100 euros from his account. Then the NCB of Spain would transfer the amount from the reserve account of the buyer’s bank to the bank of the restaurant in Madrid. The bank of the restaurant then credits their customer’s account. In this financial transaction, the money remains in the Spanish banking system enabled by Spain’s NCB.

However since the restaurant is in Amsterdam, the transaction is less simple. Since TARGET2 transactions involve the NCBs of Eurozone countries, both the NCBs of Spain and the Netherlands are involved in the transaction. The Spanish tourist’s bank has a reserve account at the NCB of Spain (Banco de Espana) and the bank of the restaurant in Amsterdam has a reserve account at the NBC of the Netherlands (De Nederlandsche Bank). The transaction is settled via the European Central Bank (ECB) between the two eurozone NCBs.

To summarize; 1) The Spanish tourist pays 100 euros to the Dutch restaurant. 2) The two transactions between the NCBs of both countries means an asset of 100 euros to the NCB of the Netherlands and a liability of 100 euros to the NCB of Spain.

Having given a basic example how the TARGET2 payment system works between Eurozone countries, one can better understand the current TARGET2 balances between the different countries in the Eurozone. This complete information of this can be found here from the official website of the ECB.

The figures from the latest TARGET2 balances report indicate that as of May 2019, Germany’s NCB, the Bundesbank, was running a surplus with other Eurozone countries of EUR 934.6bn whilst the NCBs of both Italy and Spain were each running a deficit with other Eurozone countries of – EUR 486.5bn and – EUR 405bn respectively. These figures indicate enormous TARGET2 imbalances between certain eurozone countries. In fact, according to the information provided on the website of the NCB of Germany, the Bundesbank, as of June 2019, the total amount of the Bundesbank’s TARGET2 claims are EUR 942.3 billion euros or to be exact EUR 942,319,065,584.45.

In 2012, less than three years after the start of the European Debt Crisis, the recently departed president of the ECB Mario Draghi stated that he would ‘do whatever it takes to preserve the euro’. From 2009-12, Germany’s NCB had a TARGET2 credit surplus which had increased from EUR 177.7bn to EUR 655.7bn between those years whilst Spain’s NCB was carrying a deficit, which had increased from EUR – 41.1bn to EUR -337.3bn during that same time frame.  In 2009, Italy’s NCB had a credit surplus of EUR 54.8bn yet by 2012 it was carrying a deficit of EUR -255.1bn. Today, Italy’s NBC’s deficit of – EUR 486.5bn is the largest TARGET2 deficit in the Eurozone.  Since Draghi’s pledge seven years ago, these imbalances have gotten even bigger. What is also interesting, is that since 2012, the TARGET2 deficit of the ECB itself has gone from just EUR -2.2bn to EUR -249.8bn (as of May 2019).

These TARGET2 imbalances today are important as their current levels are greater now than those during the height of the last financial crisis in the Eurozone. The question now is whether these current levels are a precursor to another financial crisis in the Eurozone or, more seriously, a potential breakup of the Euro? We are currently living in times of great global uncertainty. The rise of populism, especially in countries in Europe, is worrying. The emergence of Matteo Salvini in Italy and his fraught relationship with Brussels is unlikely to improve the already fragile economic situation in his country nor will it help to fortify the Eurozone in these difficult times. For a long time the ECB has been kicking the proverbial can down the road but as the former head of the Bank of England, Mervyn King, stated in his excellent book ‘The End of Alchemy’: ‘muddling through may continue for some while, but eventually the choice between a return to national monies and democratic control, or a clear and abrupt transfer of political sovereignty to a European government cannot be avoided’.

For countries such as Italy, Spain, Greece and Portugal, having a fixed currency like the Euro has handicapped their economic growth. Both Italy and Spain have large industries, yet not having the ability to devalue their own currencies or set their own interest rates has impacted their global competitiveness and thus their economic standing. Both countries suffer from high levels of unemployment with many young people from these countries searching for opportunities in other countries like Germany, UK, USA and Australia. The current substantial TARGET2 deficits of both Italy and Spain highlight the flaws and consequences of adopting a one-size-fits-all currency. While adopting the Euro has increased Germany’s competitiveness it has done the opposite for other large economies in the Eurozone like Italy and Spain. Hence why Germany’s NCB is running an enormous credit surplus with the NCBs of other eurozone countries.

It can be deduced, therefore, that the survival of the Euro is more important for Germany than it is for Italy and Spain. In the event, God forbid, that the Euro were to breakup and all the former Eurozone countries were to go back to their old currencies, Germany would lose its economic competitive advantage that it had as a Eurozone member since it would now be stuck with a new overvalued Deutschmark and this would thus likely effect its balance of trade. What’s more, in the event of such a Euro breakup, both the NCBs of Italy and Spain would likely default on their deficits with the NCBs of other former Eurozone countries in their new currencies meaning a huge potential financial loss for Germany’s NCB of the TARGET2 surplus monies it is owed. The upside though of any short term pain for Spain and Italy though would be that by finally having their own currencies back they would be free not only to devalue them and set their own interest rates, but they would have the chance to finally break out of their current economic stagnation, regain their competitiveness and return to higher levels of economic growth.

 

By Nicholas Peart

(c)All Rights Reserved

 

 

 

 

 

SOURCES & FURTHER READING…

 

PAPERS:

Blake, D. (2018) : Target2: The silent bailout system that keeps the Euro afloat

Lyddon, B. (2018) : The Euro’s Battle For Survival

 

BOOKS:

King, M. (2016) : The End Of Alchemy – Money, Banking and the Future of the Global Economy

 

ARTICLES:

https://www.moneyandbanking.com/commentary/2018/7/8/target2-balances-mask-reduced-financial-fragmentation-in-the-euro-area (Good article explaining how TARGET2 transactions work)

TARGET2 imbalances and the stagnating political economy of Europe

https://www.theguardian.com/business/nils-pratley-on-finance/2018/may/29/italys-eurozone-crisis-no-easy-fixes-for-the-european-central-bank

 

MISC:

http://www.csfi.org/2019-06-11-target-2-imbalances

 

 

BUNDESBANK TARGET2 Link:

https://www.bundesbank.de/en/tasks/payment-systems/target2/target2-balance/target2-balance-626782

 

ECB TARGET2 data link:

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/target_balances/html/index.en.html

 

 

Image: flagpedia.net

What Makes A Country Poor Is Her Wealth

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‘What makes a country poor is her wealth’. Those are the words of a 16th century Spanish economist commenting on his homeland. One time many moons ago when I was having breakfast at a tourist café in southern Mexico, I overhead an American telling his friends, ‘Mexico is so rich in natural resources yet it is a poor country’. At the time I pondered over these words. Yet it was not until I reached Venezuela later on during my extensive trip of Latin America that those words began to have more weight with me.

Venezuela has one of the largest deposits of oil on the planet yet its history since it first gained independence from Spain has been rocky. As of today the country is in chaos with most of the population barely able to regularly access basic quotidian necessities. One story that famously did the rounds for some time was the one involving a shortage of toilet paper. Stories like these are inconceivable to outside spectators like myself. How could a country with such levels of natural wealth, fall so low? Venezuela is a breathtakingly beautiful country and I am fortunate to have some great and generous friends from this part of the world. In addition to its abundant natural resources, it has some of the most beautiful beaches on the continent (its entire coastline faces the Caribbean), rich and fertile land, pretty mountain towns and Spanish style colonial towns, a vast and diverse geographical topography etc – I could go on. But lets go back to those immortal words; ‘What makes a country poor is her wealth’. In 1973 and more than two decades before Hugo Chavez came to power, Venezuela experienced an unprecedented boom owing to a freak surge in the price of oil. The country’s oil revenues for that year alone were greater than all the previous years combined. Yet the former Venezuelan oil minister and co-founder of OPEC, Juan Pablo Perez Alfonso, refused to party denouncing oil as, ‘el excremento del diablo’ or ‘the devil’s excrement’. Furthermore he chillingly prophesized, ‘Ten years from now, twenty years from now oil will bring us ruin’.

With the exception of a small handful of nations, who had the foresight to diversify their economies away from natural resources, many natural resource rich nations are not as fortunate. Africa is loaded with natural resource rich nations that today still remain poor and underdeveloped. Angola and Nigeria’s vast oil and gas deposits have created more misery than prosperity for most of the population. Today Nigeria has one of the fasting growing economies in the world yet much of its future prosperity will depend less on oil and more on diversifying its economy and stamping out corruption. Norway and Qatar are two oil rich countries. Yet both countries also have a substantial sovereign wealth fund. This means that when the price of oil is depressed, they have a cushion to land on during the lean times.  Saudi Arabia, arguably the most oil rich country on the planet, for too long was overly reliant on its number one export yet in recent times it has followed in Norway and Qatar’s footsteps by establishing its own sovereign wealth fund to diversify away from the black stuff. Hopefully Venezuela, once it is finally able to free itself from the destructive Nicolas Maduro regime, will follow suit.

It is a blessing in disguise that the UK (barring the North sea offshore oil and gas deposits in Scotland) is not a natural resource rich country. This means that in order to maintain financial prosperity, it has to retain a dynamic and business friendly economy.

 

By Nicholas Peart

(c)All Rights Reserved

 

Sources/Reading material:

‘The Devil’s Excrement’ by Jerry Useem (2003)

 

Image: Aljazeera.com