Our Winter of Discontent
December 31, 2015
Let us review the sobering events of 2015 as they pertain to the northern economy:
- Oil price collapse to $37 per barrel. Ft.McMurray hit hard with canceled projects and firms that are laying off staff to survive. Giant Suncor makes a consolidation play to acquire COS (the Syncrude oil sands operation).
- Copper price below $2.50 per lb. Yukon’s Minto mine is hanging on by a thread.
- Shell withdraws from arctic drilling offshore in Alaska. After spending more than $4B the company cries uncle and cancels further exploration drilling.
- Commodity prices were lower, resulting in further mine closures. Yukon Zinc declared bankruptcy and the Wolverine mine will never open again. The aged Cantung mine on the Yukon-NWT border ceased operations. The NWT Diavik diamond mine has announced lay-offs. 434 direct De Beers employees given layoff notices at the Snap Lake diamond mine.
- Exploration activity has been curtailed across the board. Even advanced exploration plays, such as the Victoria Gold project near Mayo, Yukon cannot attract investment capital.
- LNG prospects dim. The plethora of projects expected to be launched in 2015 have been held in abeyance as natural gas prices weaken.
The question needs to asked why has there been such a steep downturn, particularly in commodities?
- Economic growth in the US is around 2.25% far below past expansions. China’s growth rate has slowed to below 6%. Europe is weak as is Japan.
- All developed economies have added huge amounts of debt, yet higher growth has not happened.
- Cheap money has led to bubbles in certain asset classes, and increased risk. Savers have been punished to spur borrowing, which has led to buy-backs, speculation and malinvestment.
The biggest culprit of all are the central bankers - Greenspan, Bernanke,Yellen, Draghi and their counterparts in Japan, China and the UK. They were and are society’s sanctioned suits offering free money - the easy way out for profligate politicians who cannot stop spending. They are the manipulators who rigged the capitalistic system to remove the ‘price discovery’ aspect of money (interest rates) while providing the political class a way to avoid making hard decisions. Central bankers are supposed to ‘remove the punch bowl’ before the party gets going, but these turkeys spiked it with vodka.