In Joyful

Our Current Credit ContractionWe are in the midst of a credit contraction. The great trading institutions on Wall St have gone broke, changed their nature or merged with other firms. Banks everywhere are under examination as to whether they are sufficiently capitalized. Loans by financial institutions are all being examined to see their validity. There is talk of a double dip recession, and fear of a continuing economic Tsunami. Insurance companies are under examination to see if their investment losses threaten their ability to meet their obligations to their policyholders. We are in a credit contraction.The Last Major Credit ContractionThe last major credit contraction occurred during the Great Depression in 1929. During that time, gold miners (such as Homestake Mining) were among the few companies to reward its shareholders. Overseeing the current credit contraction, the striking similarities have to make fiat currency the observer realize that similar sectors will again do well, for the same reasons. Starting September 2008, gold once again has started to outperform all commodities and assets.Gold Mining Shares as an InvestmentAn examination of current factors indicates that that gold mining represents the best wealth creation opportunity over the next several years. In 1971, the price of gold was $35 per ounce. An investor could have bought gold bullion in 1971, and have a thirty-five fold return and counting as of today. Yet despite the price of gold increasing thirty-five fold, gold mining itself has not generally been a productive enterprise for investment. Why? Because the input costs (the cost o produce an ounce of gold) increased faster than the price of gold, resulting in little margin for the industry as a whole.Finally, a Fundamental Change in the Cost of Mining GoldIn September 2008 private credit growth peaked.