Sprott Describes The Greatest Trade Of All Time

Tyler Durden's picture

From Kevin Bambrough of Sprott Asset Management (pdf)


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weinerdog43's picture

Oh no!  A factual article where government made a great descision.  What will the children (like Ron Paul) think?

AnarchyInc's picture

How very straussian of you to say that defrauding and robbing millions of people is a "good decision."  Shame sir

IBelieveInMagic's picture

What has to be recognized is that the US has provided in return (to other commodity importing countries such as China) is the intangible security of a relatively smoothly functioning commodity flow from commodity surplus countries thereby avoiding blood and treasure for all commodity importing countries (who would otherwise have had to fight to secure those supplies). This has to be properly valued (manifests itself in the value of the USD) to get a complete understanding of the trade equation.

The benefit to the US as enforcer of this system is the previlege to consume energy way beyond it's means. Yes, the system is not fair to everyone but it is what it is -- the reality is that just because there is valuable commodities in a country, does not automatically ensure benefits to that country (that country has to be able to defend it). Very brutal reality.


SipOnSodapop's picture

in 2012 democrats will run on "Driving the Economy Straight Into Hell". It was reckless for democrats to downgrade US to AA+

Ahmeexnal's picture

Yes it is.

Until your head drops into a basket.

RafterManFMJ's picture

What if it's a basket of currencies?

Confused's picture

 relatively smoothly functioning commodity flow from commodity surplus countries thereby avoiding blood and treasure for all commodity importing countries (who would otherwise have had to fight to secure those supplies).


Sorry. Aren't we, and more importantly, haven't we, been doing this......for quite some time now? We just call it something different (it ends with all sorts of -isms) 

IBelieveInMagic's picture

The US makes the investment in blood and treasure... read endless wars in Middle East to keep the oil flowing. This is the price of our levels of current gluttony.

FreedomGuy's picture

Actually, two myths are at work in this article. First, the myth that paper currencies are ever actually worth anything. If they were truly backed up by goods, services, labor output or anything like that you could not print and creat them/money at will as banks and the Federal Reserve do. They are not worth anything but it is a game of trust that always winds down to the true value of zero. It's a game of "We will take your fiats if you take ours and we promise not to print more than you do...unless it suits our goals". So trading more of our fiat for real stuff is a winner every time. We can also leverage the stupid countries that use fixed exchange rates to get more of their stuff and export our inflation to them.

Second, one of the biggest myths and misconceptions in the general public is the trade deficit. They don't exist, ever. What the trade deficit measures is only one thing, currency flows. That has some value because currencies must be exchanged and they can build up. However, if a farmer in India decides to buy a half million dollars worth of farm equipment from John Deere, JD and the US receive $500k in currency but the farmer has the equipment. The trade is always exactly even. Now the farmer produces twice as many crops, charges 2/3 the price and is way more productive and profitable. Yet, the squawking heads in print and TV might scream about an Indian trade deficit. Didn't happen.

Put is another way, you run a trade deficit with Walmart, Home Depot, Kroger's, your hair salon, etc. Yet, you still prosper. How is that possible? The reason is you get goods and services equal in value to what you spend. Other people run deficits with your company but it all evens out in the end. The only thing you need worry about is getting good value for your money.

We have an entire world driven by phony numbers like trade deficits, GDP's which include government spending and so on. It leads to more bad decisions, pain and misallocation of resources than anything else in this world.


Common_Cents22's picture

I wish I could print money.  I'd run a trade deficit with Ferrari, Bentley, Lamborghini and everyone else, giving them more and more less valuable IOU's.   Brilliant!

mkkby's picture

Good post, Magic.  But that doesn't justify privatizing the profits and socializing the losses of a few privileged players.  That is simply dirty corruption, which should be routed out by the world's "police force".  It has essentially turned a valuable enforcer into a gangster which everyone will oppose.

IBelieveInMagic's picture

Ah, I see your objection is to the uneven distribution of the loot and not to the actual looting! It appears many on this forum feel likewise -- it is the issue of honor among thieves.

trav7777's picture

we've also traded our entire manufacturing base for the goods that we used to manufacture.  And the execs of those corporations got filthy rich

IBelieveInMagic's picture

That was part of the arrangement -- the third world gets the jobs but meanwhile we get to overconsume valuable commodities, that would grow increasingly scarce by the time the third world gets ready to upgrade their lifestyle and increase consumption -- brain child of very strategic thinkers like Henry Kissinger.

Antipodeus's picture

In other realities that is often called a 'protection racket'.

Silver Bug's picture

Another fantastic piece of work from eric sprott. Keep it up.



thesapein's picture

He just had a great interview by King World News, available today. Also, he sat down with James Turk during the GATA convention last week, available at GoldMoney's video's page.

Sequitur's picture

Frightening statisics. I look at my federal reserve notes and am depressed. But then I pull out my token one oz. gold maple, and it makes me feel better. Much, much better. Au - investment of the millenium.

Mister Minsk's picture

You Amerikans had it too good!

ViewfromUndertheBridge's picture

you never know what you got 'til it's gone...

sitenine's picture

All your reserve currency are belong to us, bitchez!

masterinchancery's picture

And you can paper your bathroom with it.

Gavrikon's picture

And the softer it gets, the nicer it becomes for wiping your ass.

living on the edge's picture

What we have all witnessed is the con of the century or actually the millenia. These psychopaths need to be gathered up and dealt with. No fiat currency will be spared and gold/silver need to be purchased for protection.

IBelieveInMagic's picture

The gold trade is good until a new arrangement is agreed to by G20 -- the appreciation of precious metals is indicative of level of distrust among countries -- but the alternative to coming up with a new arrangement (not necessarily reflecting fairness but what countries are willing to live with) is disasterous wars. Let us hope we can agree to workable arrangement rather than more destructive settlements.

trav7777's picture

maybe the century but not any larger than the Sterling Bill, which was the lynchpin upon which the entire Imperial power of the British rested.

topcallingtroll's picture

You are right about that.

Most Americans don't realize our wealth is from our WRC status.  However they also don't realize that our loss of jobss and industry is also from that status.

  The future we will have the worst of both worlds.  No industry and no WRC.

unky's picture

Very unlike Hannah Montana which has the best of both worlds ;- )

perchprism's picture


I can't click on it to expand it, and the PDF file "cannot be found".  So, I can't read it.

Esso's picture

Click on the box to the right of "Scribd" at the bottom of the document (view in fullscreen).

reader2010's picture

However , Jim Rogers thinks the greatest of trade of all time is farmland. Here is what he said recently, 

I have frequently told people that one of the best investments in the world will be farmland.

You've got to buy in a place where it rains, and you have to have a farmer who knows what he's doing. If you can do that, you will make a double whammy because the crops are becoming more valuable. - in nzherald.co.nz

Poor Grogman's picture

I respect Jim rogers opinion.BUT....

 I agree with him in general, but with due respect, it has always been more profitable to trade the commodity rather than produce it.

That is unless you can control

1. Commodity prices.

2. Rainfall (amount AND timing)

3. Government interference (Rates, Land TAx, Environmental regulation, animal welfare issues)

4. Price and availability of input costs (including fuel, water, and labour)

5 Foreign competition (including changes to import export rules subsidies protectionism etc:)

But apart from that go for it.


Spoken from experience, with a hat tip for the man on the land.




reader2010's picture

"more profitable to trade the commodity rather than produce it."


Yes and no. In a world of shortage of supplies, producers can have a upper hand. Take a trip down to Brazil, you will have a front seat to witness multinationals from US, Japan, China and India trying to overbid each other to get delivery contracts signed by soybean farmers even before seeds are sowed.  

Poor Grogman's picture

I know plenty of farmers who have gone into debt deeply to plant large crops for contacts that weren't worth shit. When the multinational decided that it had fulfilled its downstream production capacity.

If they need 200 tonnes for a processing plant do you think they will contract for that exact amount?

How about contracts for 300 tonnes just to make sure we have enough for the factory?

Read the fine print and learn.

It is always the little guy that gets screwed.


GFKjunior's picture

You're right. But it can happen under a lot simpler than circumstances than a supply chain rip off, what is farmland worth if you have a drought and heat wave like do in Texas right now?

Poor Grogman's picture

You can do everything exactly as it should be done for ten straight years, but if the seasons and markets are against you....

What is there to show for it?

Just more debt....



reader2010's picture

In Brazil,  multinationals actually provide funding with ultralow interest trying to overbid each other.

Poor Grogman's picture

Great a new form of debt slave is born.

reader2010's picture

The Chinese have been offering 0% interest to get their contracts signed.

Poor Grogman's picture

That might work well for the Chinese if they revalue their currency between planting and harvest while paying in local currency.

But seriously there is just way too many variables that the average investor cannot control.

Just saying.

Ahmeexnal's picture

China will pay Brazilian farmers with worthless USD.

Brazilian farmers should demand only gold&silver as payment.

falak pema's picture

Recycled fiats running on ethanol, Italiana cars, chinese entrepreneurs and US oligarchs burning inflated money to feed favella slaves. Nice scenario of next round of "global" trade to hit Sud Amerrika as Norte is fukufukked with fallout, black urban mobs and broken down infrastructure; with muni buro structures that look like Bengladeshi led functionaries.

bill1102inf's picture

Too bad Brazillians live like kings with US Fiat.

Ahmeexnal's picture

1% of brazilians might live like kings.

The rest live in favelas.

trav7777's picture

no, they don't.  I can see you've never been to Brasil