You all know the story.

The race to secure natural resources is intensifying. Particularly amongst governments and nationally-sponsored corporations. And particularly in Asia.

We�ve been seeing signs the last few years that Asian nations are stepping up their drive for oil, copper, iron and natural gas. I talked last week about India jumping into the fray in a big way for coal.

A few more indicators this week worth mentioning. Korea is upping the ante.

Korea National Oil Corp (KNOC) leaked this week that it will sell between $500 million and $1 billion worth of bonds to fund its $2.6 billion hostile takeover of Africa/North Sea-focused Dana Petroleum.

The same day, the world’s second biggest smelter, LS-Nikko announced a joint venture with Korea’s top steelmaker, Posco. Under the deal, the two majors will work together on the acquisition and development of copper and iron ore projects.

These are deals of mega-proportions. So much so, the Korean government said it fears currency appreciation because of state-associated firms issuing billions in new won-denominated debt.

Not to be outdone, Japan also announced some ambitious natural resource plans this week. Tokyo Electric Power Company (Tepco) said it is aiming to take more ownership in liquefied natural gas projects around the globe.

Tepco currently sources 11% of its LNG supplies from projects in which it owns equity. Mainly Australia’s Darwin LNG facility. The company said it wants to grow this to 33% equity supply by 2020.

This is a big jump in supply. Meaning Tepco is going to have to be fairly aggressive in pursuing buy-in on new projects.

With all these plans on the books, deep-pocketed Asian governments are going to be increasingly butting heads with regular corporations as well as each other when it comes to buying resource projects. A lot of cash is being brought to bear on the sector in a great game of “chicken”, with significant implications for project valuations.

The Asian slant means projects within shipping distance of the East are going to be in demand. Pick your investment spots wisely.

Here’s to the amazing race for resources.

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Bernanke believed that University of Chicago economist, Milton Friedman, had discovered the antidote for deflationary depressions. Noting that the money supply had contracted between 1930 and 1933, Friedman theorized that if the Fed had then engaged in sufficient monetary expansion, the depression would have been averted.

The highly intelligent often mislead others as well as themselves

At Milton Friedman’s 90th birthday party on November 8, 2002, Ben Bernanke publicly thanked Friedman for his theories regarding the Great Depression:

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. [i.e. the Fed caused the depression by its monetary tightening] We’re very sorry. But thanks to you, we won’t do it again.

In one respect, Bernanke was right. The Fed had caused the Great Depression but not for the reason Friedman and Bernanke believed-the Fed had caused the Great Depression by providing the leveraged credit speculators used to drive stocks to stratospheric heights prior to the 1929 crash, a crash so spectacular it would wipe out the savings of the nation, plunging America and the world into an economic abyss from which it would recover only after WWII had wiped clean the remaining balance sheets that the Great Depression had not.

Bernanke’s public thank-you to Milton Friedman in 2002 was as premature as George W. Bush’s proclamation of a US victory in Iraq. Bernanke, however, was appointed Fed chairman in 2006 and would soon get his coveted chance at the wheel of fortune to prove Friedman right.

After the markets collapsed in 2008, last year, in January 2009 Bernanke set in motion the greatest monetary expansion in history, an unprecedented government stimulus designed to prevent a deflationary depression as Friedman forecast.

But nine months later, the US economy began to again slow; and, now, in 2010, the ECRI, the leading indicator of economic growth in America, has plunged once again into negative territory. Put to the test, Friedman’s theory is a resounding-and costly-failure.

As the below ECRI chart shows, the powerful economic expansion beginning in January 2009 resulted from Bernanke’s application of Friedman’s expensive patent medicine that month, a prescription that would cost US taxpayers more than 700 billion dollars.

But economic growth indicators peaked abruptly that same year in October 2009, beginning a year-long detumescence to a present reading of -10.1%. Ben Bernanke shot Friedman’s mighty wad and it missed.

It is rare that human beings admit to having failed. In this, Ben Bernanke is no different than the rest of humanity and although Friedman’s theory failed, do not expect Bernanke to admit it. Bernanke is a one-trick pony. He’s going to try it again.

On August 28th, Bloomberg News reported: Federal Reserve Chairman Ben S. Bernanke said the central bank has the tools to prevent the U.S. economy from slipping back into a recession… Should further action prove necessary, policy options are available.

Note: Milton Friedman, John Maynard Keynes, Alan Greenspan, Ben Bernanke, et. al. share the intellectual failing common to all modern economists, i.e. a collective denial that paper money brings in its own time its own destruction.

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Gold is so misunderstood.

My colleagues and I often joke about how gold is the “all-weather” investment. When the economy is good, pundits claim gold will rise because of inflation. When the economy turns bad, gold bugs claim it will soar on safe-haven buying. According to conventional wisdom, there is no losing scenario for the yellow metal.

We saw more mis-judgement on the gold market yesterday.

Many analysts seized on the Federal Reserve’s Open Market Committee announcement as evidence of good things to come for gold. The Fed said in the speech that it will continue supporting the U.S. bond market, by using interest from Fed-hold mortgage-backed securities to purchase government bonds.

There was a lot of news about why this will be good for gold. Essentially that the Fed is creating money to give to the government (via bond sales). The government will spend this money, unleashing it “onto the street” where it will cause inflation. Hard assets like gold should soar.

But this is not the case. The Fed is not creating new money. It is using interest payments on mortgage securities to buy bonds.

These interest payments come to the Fed from one of two sources. Either from government agencies who issued the securities, or from the private sector who own the underlying assets.

This means whenever a payment goes to the Fed, it is being taken off the street. Either drained from government coffers (in the case of payments from agencies), or from the economy (in the case of private-sector payments).

The Fed then turns around and buys bonds. Injecting this money back into the government, and (possibly) eventually into the economy.

But the net sum of money out in the world remains the same. For every dollar unleashed on the planet, a dollar is siphoned out of the system.

Creating money is inflationary and good for gold. Cycling money between different hands is not.

Here’s to doing the money shuffle.

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I’ve been talking a lot about coal lately.

Specifically, how India’s need for thermal coal imports is going to tighten this market, both in terms of prices, and bids for coal deposits within shipping distance of Asia.

India simply doesn’t have enough coal. As of yesterday, one-third of the nation’s coal-fired power plants were running at “critical” levels of coal stocks (meaning less than seven days of supply). And 10% are at “super-critical”, with less than four days of stock.

I’ve been on this theme for about six months. And finally some of the signs of India’s “dash for coal” are starting to appear.

First, buy-outs of coal deposits. Last week, Canadian-listed coal developer CIC Energy received a $400 million takeover offer from a “multi-billion dollar Indian conglomerate”. CIC is moving forward the Mmambula coal field in southeastern Botswana (thanks for the heads-up, Saee).

India is even getting active in the junior side of the coal business. This week India’s Bhushan Steel announced its intent to buy a stake in Bowen Energy, an Australian coal explorer and developer with projects in the Bowen Basin.

Then there’s the signals from the coal market itself. This week, the chairman of the Indonesian Coal Mining Association told attendees at the Coaltrans Upgrading Coal Forum in Jakarta that India will pass Japan as Indonesia’s biggest coal export customer by 2011.

“In the past, India only bought high-quality coal, but now they started buying a lot of low-rank coal also because of an increase in domestic consumption,” chairman Bob Kamandanu said. He predicted India’s coal imports from Indonesia will rise to 70 million tonnes, up from 40 million tonnes this year.

In addition, Bloomberg reported this week that traders handling Richards Bay, the biggest export port for South African coal, believe rising demand from India could push coal prices at this locale to a two-year high.

The piece also quoted T.K. Chatterjee, procurement manager at Indian power major NTPC, as saying, “India will be importing in a big way… This will lead to an increase in prices.”

Signs, signs, everywhere signs.

Here’s to fields of coal.

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