Dust flux, Vostok ice core

Dust flux, Vostok ice core
Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

Monday, February 24, 2020

I read the news today, oh boy

Things are happening quickly, but I've been tied up with various health maintenance issues and have not been able to keep up. It would help if I could sleep, but that has been beyond my reach for most of the past week. Since multistability is in the purview of this blog, we may consider consciousness to have several metastable equilibrium states, some of which lie in the realm of sleep, and some of which lie in the realm of wakefulness. I am stuck in the one best characterized as "tired and wired". To go to sleep I have to leave one metastable equilibrium and migrate to one in the sleep portion of state space. Unfortunately, it is as if I have forgotten how.

Two stories that are of interest to me and (I think) are somewhat related are the decision by Teck Resources to withdraw its application for development of its proposed Frontier Mine oilsands project.
The company cites the inability of government (Canada) to square the circle with its stated objectives of mitigating climate change and supporting resource development.

The government had been preparing to announce a decision about the project shortly. Now it seems they no longer need to.

Coincidentally, this morning police moved in to disperse protesters around the rail blockade in Tyendinaga. The RCMP also moved in on Unist'ot'en territory in northern BC, presumably to disperse protestors there as well. I haven't seen statements by the protestors and their allies about the reason for this move, but I suspect it has to do with the Canadian government's inability to square the circle with its stated objective of native reconciliation and a (subtly) unstated objective of ensuring corporate profitability.

This move, to me, looks like it was to signal the government's intention to approve the project. Until Teck decided to discontinue the project

The Teck decision, I think, is based on rather more than has been stated. Years ago I owned a pile of shares in an entity called Fording Coal, which in its brief life made a respectable amount of money, no doubt leading Teck to buy out Fording's stake in the Elk Valley project. In reflecting on Teck's assets--a lot of coal, oil, and oilsands projects--and I couldn't help wondering whether somebody in management might be thinking about a need to scale back on carbon-intensive energy products. That perhaps someone in management might be thinking that it is better to sell off these components of the company, because their value may shortly begin to fall, and the longer they wait, the less they will get for them. I think this viewpoint must still be a minority viewpoint within the company, but it is there nonetheless.

From an economic standpoint, the rise of e-cars (much of which is going to be legislated), means lower sales of oil products going forward. Is now the time to be developing large oil sands mines--especially given the political uncertainty around developing pipelines to take the stuff to market?

Friday, February 14, 2020

The Gold-Silver Ratio

For Valentine's Day, a little something for you who love silver.

Or gold

A couple of weeks ago, Wheaton Precious Metals released a very useful study on the gold-silver ratio. Today I would like to take a look at some of its implications.

The most important implication is one that everyone needs a little time to absorb. That is that there is no characteristic value for the gold-silver ratio.

That means that there is no "true north", or no mythic value (16, for instance) to which it is attracted, and to which it would return if only the world stopped manipulating its price.

The Wheaton conclusions are quite definite. The gold-silver rises during deflationary periods and disinflationary periods (we'll look at this distinction shortly). The gold-silver ratio falls during inflationary periods.

What is unclear is whether a rising GSR causes deflation, or deflation causes a rising GSR. I know which one I believe.

Let's test this against some measures I've used for deflation/inflation. I'll use the weekly chart of USDX vs gold price, weekly, going back to the beginning of 2008.

It is a busy visual, but what we want to do is look at longer-scale variations. Intervals when both the USDX index and the gold price rise are considered deflationary. If gold rises and the US dollar index falls, we have inflation (hence inflation and deflation are not opposites). Gold falling and the dollar rising will be disinflation, and I suppose that if both gold and the US dollar fall, we must have disdeflation, although I have never seen that word anywhere. It's a little hard to say, so it might be best to leave it nameless, and remember that if it ever happens, you should be shorting gold stocks.

Through most of 2008, the graph above suggests we were experiencing disinflation, and over that interval, GSR rises from 55.7 to 77.1

Much of 2009 was characterized by inflation, and the GSR fell from 77.1 to 63.3.

Until the middle of 2010, we had disinflation, and the GSR rose slightly.

The big inflationary pulse into late 2011 saw the GSR falling to 40.8. The final blow-off in the gold price did not see any movement in the US dollar index, so it technically lies between inflation and deflation, but I don't know what to call it. The GSR actually rose during that interval, which makes some sense as the gold price rose over $200 in that time.

The following disinflationary episode that lasted through 2013 saw the GSR rise to 65.9.

Since then, the dominant trend has been deflationary, although realistically there have only been two deflationary pulses--through early 2015 (GSR 74.5) and over the past 18 months (GSR at 88.6). Most of the time has been consumed by short inflation-disinflation cycles, with slight rises and falls of the GSR without significant trend.

Over the entire chart (twelve years) the big picture is deflation, but most of that has been accommodated through cycles of inflation and disinflation.

So long as deflationary conditions persist, the GSR may rise without limit. As long as debts are created beyond any ability to repay them, deflationary conditions will rule. Under such conditions, despite the GSR being pretty much the highest in history, gold remains a better investment than silver.

However, as much of the actual deflationary effect is brought about by cycles of inflation and disinflation, there are  brief intervals where silver makes a better investment than gold. But rather than using the level of the GSR as your selection criterion, you need to look closely at monetary policy instead.

Wednesday, February 5, 2020

The colour is blue at the Aga Khan Museum

The Aga Khan is the head of a small, but wealthy, subset of Shia Islam.

He is known for charitable works around the world. Today's topic is about one of these, the Aga Khan Museum in Toronto. I had decided to visit late last year when I became aware of an exhibit based on trade in West Africa during the Medieval Era. I had been interested in this topic since the company I worked for at the time drew on the history of gold caravans in West Africa for promotional reasons back when it first began working in the area. During field work in different parts of Ghana, we discovered traces of the historical economic development of the region, some of which has been described previously.

I also took a tour of the museum, which detailed many of the architectural details which might otherwise go unappreciated. For instance, the theme of the museum was light, and the dominant colour for the exterior walls was to be white. Normally this would mean marble, but it was rejected because a study had shown that marble broke down too quickly for a building which is meant to last for hundreds of years. Instead, a white granite was located from a quarry in South America

White granite exterior walls, guaranteed to last

In keeping with the theme of light, most of the interior of the museum is bathed in light from various windows. Elaborate patterned shutters on the windows throw an ever-changing series of patterned shadows across the interior walls of the building as the day proceeds.

Pattern on most of the windows. Material is cast zinc

A Persian symbol for nothingness

Symbology is important in the museum. Apart from the above symbol for nothingess (as everything was created out of nothing, there must be a little bit of "nothing" in everything), there are hexagonal and more complex repeating motifs in the windows and vents, and even the drain in the centre of the courtyard.

Blue seems to be another common theme in the museum. Especially lapis.

The Dancer. A mosaic of lapis

Hexagonal staircase to the auditorium. Terrazzo from Italy

Looking straight up the centre of the spiral stair

Bar made from matching slabs of lapis

The auditorium. It's actually bluer than this

The dome of the auditorium

Shutter for the Bellerive Room in the museum

The principal symmetry element for the interior is a 1 m x 1 m square. All of the major features in the building line  up with the edge of the squares, or else with 2 m x 2 m squares. All of the double doorways are 2 m across, and the edge of the doorway lines up with the edges of the floor tiles (which are 1 m x 1 m). Even the tiling in the courtyard lines up with the outer edges of 2 m x 2 m squares (the straight segments in the tiles below)

Stone floor of the central courtyard, composed of the same white 
granite as the exterior walls, pink limestone from France, and 
blue lapis

A look at the surrounding grounds (the dark squares are reflecting 
pools in the summer) and the Ismaili Centre.

Nearby, the Toronto skyline says "Hello"