Mark Lundeen with superb input on what lies ahead:
Hi Bill
There is a dichotomy in this story below on the Australian mining industry – with rising costs mines should be shutting down, instead, equipment dealers can’t get mining equipment to mines until 2007 due to demand and miners are stealing trained staff to operate marginal mines due to the low cost of metal and the high cost of producing them. What gives? China!
China has more dollars than it wants but not enough basic materials for its needs, and the Australian miners know it. So they are getting ready for higher prices in metal. To make money in the next 10 years this is all you have to know – metals of all kinds are going to explode in price.
The shortage in equipment for mining in Australian reminds me of the chronic shortages in the old Soviet Union. Ultimately, "policy making" creates problems in areas of the economy that are not followed by the limited views of the "policy makers." The more economic "policy" the more economic problems. Clearly the replacement of mining company reserves were not on the list of concerns of the "policy makers" since the late 1990’s.
As similar shortages come to America, in food, housing and medical benefits do too the "policy" of selling trillions of dollars in US Treasury debt to finance unearned consumption in the voting base – expect big problems. The needs of "policy" will trump the needs of the economy. This is especially so when the US has a congressional election cycle of only 2 years.
Mark
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