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Thread: A spectacular adjustment in value on the horison?

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    Site Caretaker Dave A's Avatar
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    A spectacular adjustment in value on the horison?

    A not so idle thought that occurred to me today as oil prices sink below $30 a barrel.

    It was oil price inflation that introduced inflation to the world in the late 1960's / early1970's after the recessionary post WWII global economy.

    What are the chances that in the current environment of spectacular oil (and other commodity) price collapses (the exact opposite of those inflationary times) that we'll see a significant reversal of value in currency terms across the board too?
    The trouble with opportunity is it normally comes dressed up as work.

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    Diamond Member Justloadit's Avatar
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    Interesting thought. I always stated that the cost of crude oil was far too high, and was caused by greedy producers, which systematically made consumers poorer with time.
    What has been spawned is a new way of energy production, along with more efficient use of crude oil.
    Oil producers now want to quell this new energy by dropping the price of crude oil.
    I am afraid that far too much finance has been spent on alternative energy, and a new movement has been created, correctly or not by the "Global Warming phenomena"
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
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    Silver Member bones's Avatar
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    what i dont get is the pound
    This is what the UK exports

    Machine tools (we have that)
    Electric power equipment (to an extend we have that)
    Automation equipment (to an extend we have that)
    Railroad equipment
    Ships
    Aircraft
    Motor vehicles and parts (we have that)
    Electronics and communications equipment (we have that)
    Metals (we have that)
    Chemicals (we have that)
    Coal (we have that)
    Petroleum (we have that)
    Paper and paper products (we have that)
    Processed food (we have that)
    Textiles (we have that)

    Today's exchange rate
    Rand to UK Pound Conversion
    £1 = R21.77

    how the #### is that even possible?

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    Diamond Member Justloadit's Avatar
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    It's not what the UK exports, it's that the majority of the big corporation headquarters are located in London, and are listed on the London stock exchange, so all profits the companies make are routed to London.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Site Caretaker Dave A's Avatar
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    So how far did we fall in 1 year?

    So today I get an increase letter from a supplier. Not that they're actually giving their price increases just yet, just saying they're in the process of calculating them, and pointing out that -
    The Rand has lost 43% against the US Dollar since January 2015!

    So I thought "I know it was a rough year, but surely it wasn't that bad".

    So I checked, and guess what -

    Click image for larger version. 

Name:	1yr-rand-dollar-rate.JPG 
Views:	45 
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ID:	6134

    It was that bad!
    (Or if you're an exporter selling in USD, that good!)

    Quite a kick in the tail there too, I see. Not really looking good for the slide slowing down on current form.
    The trouble with opportunity is it normally comes dressed up as work.

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    Full Member Electrode's Avatar
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    I do not say this lightly but the reality is that South Africa is losing a fortune for 2 major reasons. The 1st most prominent is our inability to produce enough electricity. No industrial enterprise is willing to invest in a country that cannot guarantee a sustainable reliable power supply.

    Secondly is the fact that we lose our ore minerals to global consumers. A refined product or even a finished product will fetch a better price then a unrefined minerals does. To this I simply must add that nationalization of our mines can help our current situation keeping wealth locally rather than exporting both our minerals and our net profits.

    Unfortunately due to corruption and other contributing elements we cannot risk mine nationalisation. Until we have absolute certainty that we can trust the responsible entity this can be a disaster in the making.
    DISCLAIMER - The above does not constitute to legal advice or formal advice in any manner or form

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    Bronze Member msmoorad's Avatar
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    Quote Originally Posted by Justloadit View Post
    Interesting thought. I always stated that the cost of crude oil was far too high, and was caused by greedy producers, which systematically made consumers poorer with time.
    What has been spawned is a new way of energy production, along with more efficient use of crude oil.
    Oil producers now want to quell this new energy by dropping the price of crude oil.
    I am afraid that far too much finance has been spent on alternative energy, and a new movement has been created, correctly or not by the "Global Warming phenomena"
    from what i learnt, the increase in the price of most commodities is due to futures speculation on the stock exchanges.
    the producers of these commodities obviously just sat back & enjoyed the extra cash that the increase in prices brought.

    http://money.howstuffworks.com/oil-s...-gas-price.htm
    A “conspiracy theory” no longer means an event explained by a conspiracy. Instead, it now means any explanation, or even a fact, that is out of step with the government’s explanation and that of its media pimps.

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    Diamond Member AndyD's Avatar
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    Quote Originally Posted by Electrode View Post
    ......To this I simply must add that nationalization of our mines can help our current situation keeping wealth locally rather than exporting both our minerals and our net profits........
    I wasn't sure if this was tongue in cheek but I'll take it at face value. Mining is not an easy game even for the professionals and especially not so in this economic climate. What makes you think any part of the mining sector would run better if it was government owned? I'd point to the state of the national airline as a very good reason to keep the mines out of the control of government and it's cronies. Secondly it would only be worth keeping the raw resources if we actually had a strong manufacturing sector that could turn them into something profitable but alas we don't.
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    Dave A (21-Jan-16), flaker (21-Jan-16), roryf (21-Jan-16)

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    Full Member Electrode's Avatar
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    Quote Originally Posted by AndyD View Post
    I wasn't sure if this was tongue in cheek but I'll take it at face value. Mining is not an easy game even for the professionals and especially not so in this economic climate. What makes you think any part of the mining sector would run better if it was government owned? I'd point to the state of the national airline as a very good reason to keep the mines out of the control of government and it's cronies. Secondly it would only be worth keeping the raw resources if we actually had a strong manufacturing sector that could turn them into something profitable but alas we don't.
    As stated above, if things remain as they are the outcome will be devastating. Nationalization can be successful but the conditions must be right. To this we must realize that our country is losing billions to international entities. Our current situation is not sustainable. To change our heading we need to consider new avenues.
    DISCLAIMER - The above does not constitute to legal advice or formal advice in any manner or form

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    Quote Originally Posted by Dave A View Post
    What are the chances that in the current environment of spectacular oil (and other commodity) price collapses (the exact opposite of those inflationary times) that we'll see a significant reversal of value in currency terms across the board too?
    Our world or the real world? A world which gets smaller year by year. It is a very different today, to the one of fifty years ago.

    Quote Originally Posted by Electrode View Post
    Our current situation is not sustainable. To change our heading we need to consider new avenues.
    As for South Africa this economy is entering unchartered territory. A space where the rules don't apply and all we can do is buckle up.

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