Much has been made about the paralysis of lending by banks in both Great Britain and the United States. Balance sheet repair is certainly a significant part of the credit smackdown that is dominating financial news and creating in some a sense of desperation. The other half of this bitter pill is that..well..no one trusts anyone else. I have the feeling that long after people have forgotten what TARP represented the name Bernie Madoff will stand as a testament to investment fear, gullibility and anger. There are two schools of thought (at least) on the lending issue.

The first counsels caution on the part of Governments and goes like this: Banks know lending (please try and keep a straight face) and will begin making committments when its prudent and they feel secure in their financial status. Let's not get burned again. Liquidity will move through the general system (financial to business to individuals/families and back to business and the payback to financials) the way it always has. This is the Historical Guide Model. Slow and steady.

In true linear fashion, with the blinders forcing a laserlike beam into the distant future, the deflationists have made their case. It won't hold water and certainly won't prepare any active investor for the future. Inflation is caused by two things - and two only!

1. The expansion of the money supply through credit.

The subprime crisis initiated and perfected in the United States has morphed into a full blown liquidity crush that has infected nearly every corner of the financial world. The one corner that can remain functioning in a largely rational economic way are the Persian Gulf states known as the Gulf Cooperation Council ((GCC)). These include Kuwait, Saudi Arabia, Bahrain, the UAE, Qatar and Oman. Not all of these oil players are of equal consequence, but they all have a common geologic inheritance and a cultural unity. All except Bahrain are ranked in the top 20 oil producing nations and Saudi Arabia alone made over 200 billion US$ in exports in 2008. They represent the great players and the only viable swing producers.

The parabolic rise last year in oil prices gave them daily billion dollar payouts. The drastic fall has still left them able to pay off substantial social committments to their populaces and have enough left over to make forays into the Sovereign Wealth Fund arena. However, there is a future to consider and oil will not be around forever. The twin conundrums the Kuwaitis and Saudis have faced in particular is how to protect themselves from the fallout of either unacceptably low or high oil prices and (critically) depreciating value of the currency they receive for their precious oil - US Dollars.

Silver, the most volatile substance on Earth aside from volcanos, is about to go parabolic. We've seen some nice gains so far, but silver is always the last horse out of the gate and it's always on steroids. Gold will continue to rise in US Dollar terms because it's the best barometer we have concerning credit/monetary inflation. Silver, however, is where the money will be made in March and April.

Silver has much to recommend it long term - several critical tech applications - and it remains one of the very few affordable hedges against inflation that we'll most certainly face for several years. But it is the short term you need to consider, in part because we are in an investment environment that is demanding and immediate on both the attention and reaction scale.

Oil and Natural Gas are typically welded at the investment hip. They often occur simultaneously in developed fields and are lumped together in much the same way as physical gold and silver - ratios of one to the other are viewed historically and investibility in either looks attractive when those ratios are either high or low.

I'm going to offer an alternative view. Consider oil and natural gas as different bridges, of limited life-spans, to the future. Oil's bridge was built generations ago. It lifted early industrial, fuel powered societies thru an assisted muscle powered age to a decidedly unmuscled technological age. While there are still decades of diminishing supply left it is the fuel of the past. Literally, that bridge has been crossed. Natural gas will, of necessity, carry us over a shorter time span to the next energy bridges, most likely some version of much cleaner coal, nuclear power, and wind/solar power. Even those future generation sources will not be final answers, but in investing, final answers are not necessary. Only profitable ones.

At long last, the proposed Iranian Oil Bourse, housed on the Persian Gulf Island of Kish, has become a reality. The Iranian Bourse idea has been a fertile political dumping ground for those who long for the United States dollar's "inevitable" demise. The invasion(s) of Iraq, "bellicose" U.S. Mideast policies...even the persistent presence of Carrier battle groups in and near the Persian Guld and Indian Ocean have all been interpreted as desperate attempts to forestall the Bourse doomsday. So what does the Iranian Bourse (launched yesterday) mean for oil/petrochemical investors? And as for the fate of the U.S. dollar? Almost nothing.

Consider the following...