In a recent blog I argued that the world is embarking on a nuclear renaissance in light of growing demand for power and in the face of energy supply issues.

In the event that you did not find the notion of a nuclear revival to be credible, consider this:

On July 18th, the National Petroleum Council delivered its report ( Facing the Hard Truths about Energy) to the US Secretary of Energy. Up until now this Council has always taken the optimistic route saying that new fields would be discovered and more advanced exploration technology would save the day. This years’ report marked a notable shift from past thinking. Even the title of the report suggests a shift in thinking. The report talks about how after 2015 oil output from non-OPEC nations will start to decline - something that until now was never spoken about in Washington circles. And buried deep in the report was perhaps the most shocking of all statements.

In a recent report, I wrote of how China was experiencing severe problems as a result of having its currency pegged to a basket of foreign currencies largely dominated by the US Dollar.

This week I find myself in San Francisco at the Hard Assets Conference. After a quirky breakfast at Lori’s Diner - a 1950’s styled eatery, I brought myself back to reality with a short walk uphill (is everything uphill in this town?) to Borders bookstore where I bought the Financial Times Weekend Edition.

A chart buried on page 18 caught my caffeine-heightened attention and I have re-produced this chart for you above. Arab Gulf nations like Saudi Arabia, Kuwait, Bahrain, Qatar, UAE, and Oman have all pegged their currency to the US Dollar. And rightly so, given the oil trade that these nations conduct in US Dollars. Problem is, if I peg my currency to yours, I have to follow your Money Supply policies. If you ramp your money supply up in an unbridled fashion, then I must do likewise.

Since August we have been overwhelmed with nothing but bad news from the sub-prime mortgage front and from the global liquidity arena. The news and events since August have been almost enough to make people admit defeat. And that is precisely the discussion I had with a gentleman from Wachovia Securities whilst in Cancun recently at the FAMMS Conference.

The terminology we bantered about was the phrase “liquidity trap”. A liquidity trap tends to occur in an economy when financial intermediaries are not willing to lend to each other. Consumers scale back their spending even though interest rates remain favorable. Financial markets tend to then suffer (just ask the Japanese who endured a decade long liquidity trap). And a liquidity trap is precisley what we may be facing now.

Banks are sitting with off-balance sheet assets (the true extent of the SIV's still is unclear) and the economy is waiting for the “other shoe to drop” as it were. Consumers are starting to scale back in the face of a weakening housing market and the financial markets are up one day and down the next as uncertainty prevails. A recent report on BBC even suggested that 34% of sub-prime mortgages are going into default in the USA.

I recently had the good fortune to make a trip to S.E. Arizona. My journey took me from Tuscon in an easterly direction towards Wilcox. This part of Arizona is a geologists dream thanks to its location on the slopes of the Eastern Dragoon Mountains and it consists of granites and schists that have been overlain by younger limestone sediments.

This sequence of rocks has then been intruded by porphyry action. Hydrothermal fluids circulating under immense heat and pressure under the ground eventually brought Copper mineralization up into contact with the limestone areas. Also over time, the entire area has been faulted and folded and tilted to an angle of about 34 degrees.

Right beside I-10 and some 15 miles from Wilcox, I discovered a small company, currently trading on the Pink Sheets, that is mere months away from Copper production and cash flow.