February 16, 2006

To: US Securities and Exchange Commission
Subject: File Number SR-Amex-2005-072

Dear Sirs,

If you have read my previous comment urging the SEC to approve the listing of Barclays' iShares Silver Trust, you might have inferred from my closing remark "I hope you will make a wise decision. A decision that helps keep civilization safe." that I was just a crank. What might an investment vehicle for silver have to do with keeping civilization safe?

A great deal indeed if we take into account the strain that the coming (no later than 2015) peak in the global oil production rate - aka Peak Oil - and the subsequent relentless decline thereof will place on industrial societies. This issue in turn is not just the domain of arguably cranky retired geologists, but has been addressed by undisputably respectable figures such as US Representative Roscoe Bartlett (R - MD) and leading investment banker for the energy industry Matthew Simmons, as can be seen respectively at http://www.bartlett.house.gov and http://www.simmonsco-intl.com

Back to silver, we already know for certain from CPM Group and the US Geological Survey respectively that there is very little silver remaining both above and below the ground. If we combine that with the well-known fact that silver - because of its outstanding properties like resistance to corrosion, highest electrical conductivity, reflectivity, etc. - is an essential component for manufacturing critical devices (particularly solar panels and batteries) that might alleviate at least in part the coming energy crunch, we arrive to the conclusion that we'd better start conserving silver for the rainy days to come. And how do you induce people to start conserving a scarce crit ical resouce other than by higher prices? Which is exactly what Mr Greenspan said, where "energy" can be perfectly replaced by "mineral":

"The experience of the past fifty years--and indeed much longer than that--affirms that market forces play a key role in conserving scarce energy resources, directing those resources to their most highly valued uses."

"Barring political impediments to the operation of markets, the same price signals that are so critical for balancing energy supply and demand in the short run also signal profit opportunities for long-term supply expansion."

Now, does history provide any clue as to what can happen to a society where critical depletable natural resources were completely exhausted? It does, and the best (actually worst) case is that of Easter Island. That case is extensively covered in the 2004 book "Collapse: How Societies Choose to Fail or Succeed" by Jar ed Diamond. Here is an account of comments from Diamond himself on his book at a conference last year, from http://discuss.longnow.org/viewtopic.php?t=34

"He elaborated a bit on his book's account of the Easter Island collapse, where a society that could build 80-ton statues 33 feet high and drag them 12 miles, and who could navigate the Pacific Ocean to and from the most remote islands in the world, could also cut down their rich rain forest and doom themselves utterly. With no trees left for fishing canoes, the Easter Islanders turned to devouring each other. The appropriate insult to madden a member of a rival clan was, "The flesh of your mother sticks between my teeth!" The population fell by 90% in a few years, and neither the society nor the island ecology have recovered in the 300 years since.

Diamond reported that his students at UCLA tried to imagine how the guy who cut d own the LAST tree in 1680 justified his actions. What did he say? Their candidate quotes: "Fear not. Our advancing technology will solve this problem." "This is MY tree, MY property! I can do what I want with it." "Your environmentalist concerns are exaggerated. We need more research." "Just have faith. God will provide."

The question everyone asks, Diamond said, is, How can people be so dumb? It's a crucial question, with a complex answer. He said that sometimes it's a failure to perceive a problem, especially if it comes on very slowly, like climate change. Often it's a matter of conflicting interests with no resolution at a higher level than the interests--- warring clans, greedy industries [Note from HPA_Fund_A: might the Easter Island have had a Tree Users Association?]. Or there may be a failure to examine and understand the past.

Overall, it's a failure to think long term."

I do hope you have understood what is at stake and will make the right decision.

Sincerely,

Hubbert's Peak-aware Fundamental Analysis
Promoting understanding to cope with resource depletion