I would like to comment on the topic of revaluation of the Chinese yuan.

Many years ago, I was trying to catch a train at a Chinese train station. It was during Spring Festival or the busiest time of the year for travel. There was construction at the main entrance to the station. So the authorities blocked it off. Hundreds of policemen and soldiers channeled people through a series of improvised gates for the safety of the passengers. Basically, they were trying to channel people through pens. The lines narrowed as they got closer to the ticket booths (for those people who wanted to catch a train) until it was just a single line. In terms of time, it meant that I would have to wait in line for about an hour.

It also meant that I would have to roll one bag in front of me and one bag behind me. I naturally was concerned about pick pockets at the train station, too, and I would have both hands occupied with bags while everyone surrounded me at the start of the line. The policemen and soldiers would be of little help if someone decided to pick my pocket.

However, at the side of the building was an up and down staircase. The staircase was very crowded with people who had arrived from the trains. In other words, everyone was coming down this staircase. I realized that it would take much less time to enter the building on this staircase. And there were no policemen or soldiers at this staircase. As a passenger, I had the right to go up this staircase.

It was tough going up the staircase. But when I started I noticed that there were others who were following me. By the time I reached the top of the staircase, there were as many people going up the staircase as there were going down. I reached the ticket booths in five minutes.

It seems to me that there is an analogy with the issue of revaluation of the Chinese yuan. It may take a long time to wait for the Chinese to revalue the yuan even if it is in the interests of the world economy and even if it is in the interests of the Chinese economy. In other words, the United States is like a passenger who is trying to reach the train, but finds itself hemmed in by artificial barriers. We may have our pockets picked if we continue to stand in this line. The economic safety of all passengers is threatened if there is a choke point at the entrance because either they will have their pockets picked or they will not reach their destination and be able to return to their jobs.

Currently, the Chinese yuan is linked to the US dollar. There is no indication that it will be delinked or revalued. I would propose therefore that the US dollar be linked to a basket of world currencies (including the Chinese yuan) and a basket of commodities. This list of commodities should include REEs which are now basically valued in terms of Chinese yuan.

This should allow the US dollar to fall gradually as opposed to a devastating devaluation against the yuan. It allows the US to gain control of its own economic future. It also protects Chinese investments in US treasuries and bonds from a large currency loss.

It places the dollar on firmer ground because half of its value would be based on real commodities. It would recognize the reality that commodities are beginning to be valued in terms of Chinese yuan and that this trend will accelerate into the future. By valuing the dollar on a basket of commodities means de facto that the Chinese yuan is based on a basket of commodities and that it will also be linked to currencies other than the US dollar.

Yours,

Dennis Carlton Rossi

I think that the issue for copper production is sustainability. In 2008 copper production was the highest it had ever been in history; there were more than 15,000,000 metric tons of new copper produced in 2008.

I don’t see how a figure like that can be maintained, much less increased, for much longer. Recycling is not the answer, since copper recycling has been for a very long time a very large business. A few societies are “base metal mature.” The USA is one of them; we can probably just makeup with new production what we use and/or lose (for example I believe we export too much of our copper scrap to China and then buy only some of it back and then only as high vealue added products). But the BRIC economies are just beginning to use copper, and I do not think there is enough production possible at current prices to susatin this growth.

In the long term I would buy copper as an investment; at the very least it will help you keep pace with what I am now coming to believe is the coming commodity price inflation.

Jack

Thanks.

I worked on a project to introduce Chile’s SQM, the world’s largest producer of lithium, to Detroit’s GM three years ago. I became aware at that time of the immense resources of the Atacama and Chile’s lithium wealth. I have been following copper for a very long time, and I have been aware of Chile’s dominant role in that commodity most of my working life.

However I do think that Canada’s range of resources as well as their accessible deposits makes Canada today perhaps America’s most important trading partner.

There is a lot of talk about the re-industrializing of America through green technologies. I think it is far more likely that this will occur in Canada.

Jack

For a history of rare earth element prices in the USA you can go to the commodity mineral surveys of the USGS at http://www.usgs.gov. You will find there an entry for historical pricing, which takes many metals back as far as 1900. Rare earth prices, calculated I think as an avaerage of all of the ones sold or available in any one given year are there. A glance at the data shows just how “cheap” rare earths have been. Do not let “experts” tell you that the exact yearly prices are often wrong in this compilation, becasue you are looking for trends and relative data, and it’s there to see. I’ll be publshing some comparative graphs of rare earth pricing and base metal pricing next week as it happens.

As to your suggestion for a type of alternate world story about a world-at least a western world-without access to rare earths. Please look around you. We have already embarked on the path to living in that world.

Jack

The paucity of comments on your reports is a sad reflection on the few commentators who understand what you are taking about.
For example, we have a green movement, happy to shout slogans, which has no idea what materials are required to to build a wind turbine or solar cell for clean energy.

It may be worth your writing a provocative article “What would you do without potable water? So, why don’t you ask what the world will be like in 10 years time if we don’t have REEs in the supply chain?”