Between the three different factors which all combined at the same time, we had Hurricane Grace feeding large quantities of moisture into that deepening low pressure area, then Grace caught up and combined with the low and, finally, the deep cold front interacted with the now virulent storm to add further intensity to the mix. The result was death and destruction from off the coast of North Carolina all the way to Iceland.

So, the big question for us is this: “Could a ‘perfect storm’ of that nature become a reality for our economic world?” and I believe there is a definite possibility such could truly become the case. Here are some of the reasons I have come to that belief.

Economic conditions are now favourable for storm development. We cannot avoid headlines which talk of one looming catastrophe after another. Social conditions are now favourable as well and by social conditions, I refer to a demand for government services far beyond the government to raise taxes and therefore we see developing and accelerating deficits. And, political conditions are also approaching a critical level and by that I mean politicians have been trained for generations that their means for election and then re-election is to pander to public demands regardless of the actual financial costs and any attempt to withdraw government's services can result in rioting and disorder such as we have observed in Greece and Italy.

The US existed with a very limited government from 1789 through 1913 and the predominant philosophy was to have less government, more individual liberty and more individual responsibility.

And, if you want to a classic example of that type of thinking, I would suggest that you go to a website that has Inaugural Addresses of the Presidents and read Grover Cleveland’s Second Inaugural Address of March 1893. Cleveland was a rather remarkable man who won the popular vote for the Presidency three times – exceeded only by FDR – but because he lost the Electoral College vote in 1889, he held the Presidency only twice. His Inaugural Address of 1893 epitomized the classical tradition which was the United States of America.

Until 1913, that was the standard of government in the United States, but then how things changed!

We had a series of people of great influence who shared differing belief systems, starting with President Woodrow Wilson who, in his Inaugural Address of 1913 declared that he would set out to champion social reform and strengthen the role of the federal government in American economic life.

Then came Franklin Delano Roosevelt from 1933 through 1945, accompanied by another enormous expansion of government and, at the same time, Lord John Maynard Keynes literally revolutionized the world of economics by justifying government intrusions into economic life.

As a result, we saw an enormous expansion of government services and it was this expansion which ran smack into the limitations caused by America’s currency fully backed by precious metals, particularly gold. To have a gold standard, meaning full convertibility of paper currency into gold coin, you cannot have unlimited creation of currency, you can only have as much currency outstanding as is permitted by the quantity of gold possessed by the nation. But this limitation did not coincide with Roosevelt’s plans to expand government, so in 1933, in a dramatic move, he outlawed the private holding of gold coinage and broke all domestic ties between the US Dollar and gold.

In what I personally regard as remarkable assault on individual liberty, he actually ordered that people be required to open their safety deposit boxes in the presence of Treasury officials who then confiscated any private gold holdings and repaid the citizens with paper currency. That action allowed FDR to expand his array of social programs, many of them financed by government borrowings, and it was also an important historic fiscal event as the one real limitation on the financing of government expansions was broken, as evidenced by the enormous build-up during the LBJ years when President Johnson financed the ‘guns and butter’ programs of war in Vietnam plus concurrent “Great Society” social welfare undertakings through government borrowings.

The rest of the world became concerned about this build-up of debt and began to convert their dollar holdings into gold – which was still possible for foreigners – until Richard Nixon slammed the door on ANY official convertibility of US Dollars into gold in 1971.

If anyone thinks this is a small matter, I would suggest they go to charts where such figures as US National Debt, US budgetary deficits, US Money Supplies and other figures of that nature are displayed and you will see a dramatic skyrocketing of such data since 1971. The size of the US National Debt became an issue when during the early years of Ronald Reagan it passed through one trillion dollars, but that figure has now been multiplied fifteen times over in just three decades.

With the limitations imposed by gold now completely removed, there was an astounding growth in the US National debt from less than four hundred billion dollars in 1970 to $14.7 trillion today (1) and there has been a concomitant increase in federal deficits from less than $50 billion in 1975 to more than one trillion dollars for each of the past two years and even the normally optimistic Congressional Budget Office sees deficits of one trillion per year or more stretching at least a decade into the future.

If that happens, it will add at least another ten trillion to America’s national debt – or a total of $25 trillion.

Over in Europe, the historic background of most European nations has been much more socialistic than anything we have seen in the USA or Canada. Germany has a long history of socialist government where the government has been responsible for taking care of the people; they have a strong indoctrination in government providing an enormous number of services; there is a long history of collective action and, as a general rule, European nations have a huge number of regulations that have a tendency to limit industrial efficiency.

There also was a history in Europe of chaotic comparative currency values. There were probably twenty-five to thirty different currencies in Europe and trying to exchange one for another became increasingly difficult to accomplish with any degree of efficiency. Also, every time someone wanted to cross a border – and there were borders virtually every fifty to one hundred miles – it was creating a great number of problems.

So what developed was industry became less efficient, commerce was becoming difficult and massive deficits throughout Europe became the norm. In order to fix those situations, the decision was made to try and unify Europe into one economic unity, to ease border crossings and, very relevant to today’s world, to establish a single “Eurocurrency” for all member nations to ease currency transactions.

I don’t know if any of you have been to Europe recently, but the “Euro” is the currency you receive in virtually every nation except Switzerland and the United Kingdom.

There was also something else they did which in hindsight may have been very foolish. They allowed new countries entering the European Union to receive bonuses to help them bring their economies up to European standards. What that did was to create an enormous demand for the creation of Euros which I believe has led to the subsequent debacles we are witnessing today.

But the stock markets are celebrating because this action seems to have alleviated the current crisis.

Besides those nations listed above, there are more problem countries on the way including France, Belgium, several of the Eastern European nations and others where the debt/GDP ratio indicates troubles are on the way (3).

The important question is where the funds for all this additional help are to come from and we haven't found out that answer yet.

Now, let's look at China. For centuries China was an immensely populous but economically dormant nation. Nothing much was happening in that agrarian society with very little industry. However, in the late 1980s and early 1990s, the Chinese leadership made a calculated decision to open their nation for foreign investment and, since that time, the economic transformation has been beyond belief.

Hundreds of billions of dollars in foreign capital poured into China and industrial plants sprang up, particularly in the eastern half of the nation. Cities mushroomed while huge numbers of people moved from rural areas into those cities in search of a better economic existence. Almost overnight, metropolitan centers like Beijing and Shanghai became major international financial centers sporting an enormous array of skyscrapers, freeways and other urban area accoutrements.

Two years ago, China announced a special program to finance almost $600 billion worth of infrastructure improvements to keep up with ongoing developments.

What we are seeing now, just like what has taken place in once ultra-prosperous Japan, is that many of the early advantages of China are beginning to melt away. Wages in China have gone up by 900% over the past twenty years. Real estate prices have soared above all previous ceilings and that is adversely affecting the comparative costs of production. The infrastructure problems are becoming more evident, as exemplified by their recent high-speed rail calamity which took many lives. Inflation is now beginning to rear its ugly head.

If you study the history of Japan from the end of World War Two forward, you would learn that Japan became known as the "Economic Miracle." Their Nikkei Stock Index soared from under 1,000 in 1950 to almost 40,000 in 1990. Universities around the world taught the Japanese method of economic expansion. But since 1990, something has gone wrong.

And so, China appears to wavering at best and some analysts are even predicting a "hard landing" for the Chinese economy. In fact, their Shanghai Index actually peaked in 2007 and despite nominal growth since then there have been few significant securities rallies, somewhat reminiscent of market behaviour following Japan's peak in 1990.

So, we have the United States of America undercutting its financial stability in an enormous number of ways; we have Europe requiring huge numbers of rescue procedures which are trying desperately to save their economic stability and China could be at the beginning of a period of decline.

Putting it all together, we have ballooning debts destroying currency values. I don't know if any of you have heard the expression "a race to the bottom" among currencies, but it means in effect that nations are so desperate to get business that they are currently devaluing their currencies so they will be worth less than other currencies to give them a competitive advantage in marketing their exports - in other words, a "race to the bottom", the 'bottom' referring to the lowest possible value for their currency in relation to others.

The US Dollar is now being regarded as the currency of last refuge for many and has been showing recent relative strength compared to the Euro and some other currencies. I believe that when it comes to the Greenback, we should not be comparing strength, but only relative weakness and would offer this example.

Suppose you are touring a hospital with a doctor and you look into one room and see a man coughing and hacking and he looks terrible. When you ask the doctor what is the matter, he tells you that this patient has Stage Three cancer. In the next room you find a patient in ever worse shape, bent over in agony and his complexion looks ghastly. The doctor tells you that he has Stage Four cancer and is in awful shape. You peer into the next room and there is a patient on the bed, virtually immobile and looking comatose. The doctor tells you he has Stage Five cancer and it is terminal.

What I expect is to see a revving up of the monetary printing presses (and electronic entry processes), particularly with the 2012 American election coming up while their unemployment rate is near 9.0%, their real estate market remains moribund and recently, important economic indicators such Durable Goods Order numbers have been in decline.

Perhaps of even greater importance, there has been a quantum shift in leadership opinion of what is meant by fiscal prudence.

Treasury Secretary Timothy Geithner made a comment that I found absolutely astonishing. For virtually the entire history of the United States, fiscal responsibility meant to limit debt, deficits and money creation. However, just about one year ago, Geithner said that the United States had better act responsibly by letting the world know it was going to honour its debt. And, how was it going to accomplish that good deed? His answer was the creation of sufficient new credit to assure the world that funds would be on hand to pay off debt-holders.

That definition goes along with the Quantitative Easing programs One and Two (QE-1 and QE-2) which have been replicated in many nations around the globe.

So, what happens if a "Perfect Economic Storm" plays out?

First, we would have a tremendous drop in demand for China's goods, for if the economies in the rest of the world contract, China could find diminishing order books for their manufacturing establishments.

Then, we will see a drop in the demand for the world's resources, and I hate to say that with so many quality junior mining companies exhibiting at this Conference, but if China goes into an economic contraction, the demand for resources would likely also diminish.

Then, as the world's economic leadership became desperate to 'stimulate' and 'rescue', we would likely see the hallmark of every historic hyperinflation that has taken place in the world and that is the rapid expansion of fiat, unbacked currencies - or, in the instance of Rome in the fifth century AD, the watering down of their once gold and silver coinage to the point where the coins contained only 0.2% gold and 99.8% fillers.

Other instances of the inflationary consequences of rapid money creation throughout history include the destruction of the French Assignat currency between 1789-95; the destruction of the German Mark in 1922-23; the destruction of currency values throughout Eastern Europe following WWII and, in recent times, the destruction of the Zimbabwean currency over the past few years.

Every single time; this ultimate currency destruction was foretold by rapid expansion of the monetary aggregates, just as is taking place in America and Europe at the present time.

One of the consequences of rapid rises in visible inflation is a corresponding demand for higher interest rate as the currencies shed purchasing power over time and escalating interest rates could sow the seeds of destruction in several different directions including crippling commerce, forcing government to carry unsupportable interest payment burdens on their outstanding debt and perhaps violent disruptions to commerce as price calculations become increasingly uncertain and difficult to calculate with any degree of confidence.

What could then occur is a potential breakdown in the ability of government to continue to pay out welfare, Social Security. Food Stamps and other payments in valuable currency and, should that happen, it would be difficult indeed to exactly calculate the extent of social disorders which might occur.

It is worth noting that a new danger has arisen over the past several decades. Instead of each nation operating as a separate entity, meaning their calamities would be restricted to themselves alone, the entire world's financial structure has become so inter-connected that the potential truly exists for a complete breakdown of international commerce around the known industrialized world.

The last time that happened was the collapse of the Roman Empire and you might note that collapse was followed by a thousand year era known to history as the "Dark Ages."