http://www.financialsense.com/editor...

"...In the real world, dependable depreciation of national moneys and real, but officially denied inflation provided essential support, with ever cheaper energy, to an effective debasement or devalorization of real, physical or hard assets, versus financial and derived paper assets. Oil shows this most starkly. Through 1985-86 oil prices crashed, losing about 67%. Prices for oil then stayed low, very low or extreme low, apart from the short ‘Gulf War One’ spike in 1990-91, until 1999.

In the metals and energy sphere this cheap resource party enabled or forced expiring gold, copper, lead or tin mines, and depleting oil or natural gas fields to be ‘rejuvenated’ and given a new lease on life, but only through totally inverting the golden rule of depleting natural resource producers who want to stay in business beyond the next asset crunch, that is worst grade first, best grade last. The only way this circle could be squared for a surprisingly long time in ‘post-modern’ chronology, for a little more than 15 years that is, was a diabolic convergence of cheap energy, currency devaluation and hidden monetary inflation. The most recent and biggest example of this last is the creation and introduction of the Euro, ab initio, at a fantastically over-priced level in the clear majority of Eurozone countries. We can surmise the Euro was, at introduction, around 45% over par with the moneys it replaced. Its impact on world currency values, and on implicit and potential future global economic inflation, was and is at least as pernicious as the Bush Administration’s stolid determination to devalue the dollar, this ‘mission’ being aided by the extreme overvalued Euro.

Probably the inventors of the Euro bet the cheap resources fest was long-term or even permanent, and able to palliate the intrinsic inflation their new baby, or monster could produce after its initial deflationary impacts were revealed as diametrically opposed to reality. If this was part of their strategy the bet was wrong. Firstly cheap oil, then cheap metals and energy, and now cheap food disappeared, forever in the case of oil, at a time and through a process now also making the world money system totally opaque and fragile. Energy-intense depletable natural resources are now brutally revealed for what they are – depleting and precious, radically more expensive as producers are forced back to the lower grade ores and poorer fields, which they ignored in the New Economics heyday. In the case of gold and oil, the legendary days of the yellow metal at 270 USD/ounce are as folklore-style as oil at 20 USD-a-barrel, today."