Black
Swan flight 10 is
arriving at gate B5.” One of
my friends works for United Arab Emirates Airlines and has been stranded in a
European airport for the weekend because of the volcanic ash from
Eyjafjallajokull. According to Eurocontrol about 80% of
normal flights have been cancelled. This is a visual representation of the
dark clouds looming over the global economy.
GROUNDED
FLIGHTS
With
the vast majority flights in Europe grounded there should be a noticeable
effect on economic activity. The effects on tourism, collaboration and
business will likely be long-lasting. This is an example of why individuals
and businesses should work to minimize their risk to geographic location and
discrimination.
Despite
the obvious that you
have to be somewhere; in my own situation I have largely
completely eliminated the effect of geography on my own lifestyle and, to a
large extent, my businesses and investments. Volcanos, hurricanes and
earthquakes are not the main risk I desire to minimize but instead geographic discrimination
like what recently happened in Colorado.
GEOGRAPHY
AND YOUR HEALTH
Since you have to be somewhere,
why not choose a physical location that is good for your health? As opposed
to coloured coupons like Icelandic kronars or FRN$s, physical commodities
such as wheat, corn, oil, soybeans, water, etc. must also be somewhere. Many
highly populated areas, like Linfen, China; Sukinda, India; La Oroya, Peru;
Norilsk, Russia; Chernobyl, Ukraine; Tokyo; Mexico City; Los Angeles; Sao
Paolo; and etc., are extremely polluted and prolonged exposure to the
pollutants can be hazardous to your health. Additionally, some of the
inhabitants may actively be your liability.
Can
you image breathing that ash? Can it possibly be good for your health?
EYJAFJALLAJOKULL,
KATLA AND FAMINE
Oftentimes
when Eyjafjallajokull erupts the other much more volatile and powerful
volcano Katla also
flares up. Oftentimes it seems that natural phenomenon seem to coincide with
social, political and economic factors and the overall effects are
exacerbated. When it rains it pours. For example, as The Guardian
observed:
The
Laki volcanic fissure in southern Iceland erupted over an eight-month period
from 8 June 1783 to February 1784, spewing lava and poisonous gases that
devastated the island’s agriculture, killing much of the livestock. It
is estimated that perhaps a quarter of Iceland’s population died
through the ensuing famine. … Across the Atlantic, Benjamin Franklin
wrote of “a constant fog over all Europe, and a great part of North
America”.
What
was happening during this time frame? Well, France was engaged in wars and
running large government deficits. What do government deficits lead to?
Taxation through inflation.
It was
no different in France. For example, as Olwen Hufton observed in Women And
The Limits Of Citizenship on page 25, the Society of Revolutionary Republican
Women was particularly interested in “combating hoarding [of grain and
other staples] and inflation.”
And
what does inflation lead to? Price
controls.
It was
no different in France. For example, as Robert Scheuttinger observed in Forty
Centuries Of Wage And Price Controls on page 45, The Committee of Public
Safety first attempted to set the price for only a limited number of grain
products but, by September of 1793, it expanded the “maximum” to
cover all foodstuffs and a long list of other goods.
And
what do price controls lead to? Shortages
and rationing.
It was
no different in France. We all know, or should know, the story. Louis XVI,
Marie Antionette and others of the distant central government were insensitive
to the plight of the middle class and poor who were suffering from disease,
pestilence and starvation which were largely an effect of the governmental
interference by the ruling class.
And
what do shortages lead to? If severe enough then starvation and death.
It was
no different in France. Marie even callously said, “Let them eat
cake.” When someone loses everything and has nothing else to lose then
they often lose it. In this case, the French People lost it, heads rolled,
leadership changed and the French Republic was born. The black swan of the
French Revolution was completely predictable.
WHY
HOARD
So it
begs the question: Why did people hoard grains and other staples? Because
they were safer
and more liquid.
They also hoarded gold and silver; taking their capital to geographical
locations with less political risk. This series of events; government
deficits, inflation, price controls, shortages, starvation and death, have
played out, at some point in time, in every populated geographic location on
earth. Since you have to
be somewhere; why be in these geographical locations during those
times?
CONCLUSION
In the
next few months I was planning on taking a trip to Europe. This trip may have
to be canceled if Eyjafjallajokull or Katla keep burping. I am fortunate
enough to choose where to be at what times.
Iceland
has already experienced the collapse of their banking system and currency.
There has been civil unrest in Iceland. I bet many Icelanders wish they had a
life hedge.
I do
wonder what effects these volcanic eruptions might have on Europe’s
food production over the next few years? With floods in the Midwest, droughts
in South America and Australia, desertification in China and tremendous
inflation taking place through quantitative easing to fund government
deficits for bailing out failed financial institutions; I wonder what effect
there will be on the worldwide food production and distribution system. So
beware Goldman Sachs; you never know when those black swans will fly in and
the current flight 10 landing at gate B5 is just a minor distraction from the
real issue.
DISCLOSURES:
Long
physical gold, silver and platinum with no interest in GS, the problematic
SLV, gold ETF or the platinum ETFs.
Trace Mayer
RuntoGold.com
Trace Mayer,
J.D., holds a degree in Accounting from Brigham Young University, a law
degree from California Western School of Law and studies the Austrian school
of economics. He works as an entrepreneur, investor, journalist and monetary
scientist. He is a strong advocate of the freedom of speech, a member of the
Society of Professional Journalists and the San Diego County Bar Association.
He has appeared on ABC, NBC, BNN, many radio shows and presented at many
investment conferences throughout the world.
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