The resource industry has been severely eviscerated by the financial chaos initiated by the sub prime slime. But the resource industry is used to being the favorite bottom-of-the-barrel punching bag for the global economic pecking order. It seems to be the only place to take a profit when the rest of the investing world gets tilted on its ear by the Wall Street wise guys.

And the last year certainly hasn't done anything to change what could almost now be said to be like a Murphy's law of sorts with minor variation - When things can go wrong they will but they will go wrong even worse for resource stocks. Especially the juniors.

But ( an a very cautious and qualified "but"), it would appear that during the last week, the plunge may have been arrested, and the harbinger of the junior market, the S&P TSX Venture Index, has moved more or less sideways over the week, suggesting that perhaps the annual September turnaround is indeed at hand.

Friday, August 22 saw that index have its weakest volume day since August 2006 trading a mere 36.4 million shares and bottoming for the year at 1936.27. Since its all time high on May 8, 2007 of 3337.09, the index has lost nearly 42% of its value.

The Dow Jones Industrial Average, which last closed yesterday at 11,715 is only down 17% from its high in the same period of 14,167. The Toronto senior board hit its all time high of 15,128 on May 21st of this year, and has since given back 2,049 points, or 14% to bottom last Friday at13,049, making it the most resilient in terms of value during the last 24 months.

What does this tell us?

Well, since the TSX senior board is heavily weighted with commodity producing companies, and since many of those commodities set their highest price records during 2008, its obvious that the market does not value exploration during times of high commodities prices regardless of what they are exploring for, whereas producing companies enjoy the same price pattern, more or less with the only real variation being a temporal lag.

One would think that the commodities affected indices would perform worse in the deflationary environment created by the present monetary policy and chaos in the U.S financial system. You would also imagine that, if logical fundamental principles were at work, that the junior exploration specific TSX Venture should continue its plummet unabated, if the worst of the U.S. mortgage situation is yet ahead. And we may indeed see a resumption of that decline.

But for now, at least over the last week, it sure looks like the bottom is in, and the market seems poised for another positive run.

The complicating factor, however, is the unpredictability of what is happening and what is going to happen. If the increase in mortgage foreclosures continues in the prime and alt-a categories, then theoretically the US Federal Reserve is going to print as much money as is necessary to convince the holders of the increasingly fragrant Fannie and Freddie paper in all its forms. Ordinarily, that should accelerate erosion in U.S. dollar demand, and subsequently the price of the US dollar.

In the face of increasing foreclosures, banks in the last week are on the rebound, and talk of rescues and collapses is starting to fade behind the hysteria of the US presidential election. Certainly Barrack Obama is using the financial debacle as a primary platform from which to attack John McCain and all things republican.

So why should any interest be returning at all to the junior resource market?

The fact of the matter is that strong growth in the BRIC countries remains strong and has demonstrated a resilience to the diminished U.S. market. The American comsumer has simply been replaced by the Brazilian, Russian, Indian and Chinese consumers. Collectively, these markets represent ten times the number of consumers than in the United States, though their purchasing power is on average less than 1/10th of the average American. But their purchasing power is increasing, and so its just a matter of the market dynamics shifting, rather than any serious decay in global demand for the products for which raw materials (commodities) are required.

So after a summer on the sidelines, where the biggest financial managers (sovereign wealth and ultra-high net worth funds) have been enjoying Kir Royale and yacht racing, they are starting to return from their luxurious lairs in the earth's most exclusive playgrounds to start building positions for what is likely to be the Great Leap Forward for both explorers and producers of commodities.

There are a few new potholes in the road to financial glory since the capital contraction started a year ago.

First of all, the high prices of metals and fuel over the last year have raised the average costs of building mining and oil and gas infrastructure by an average of 20%.

So, for example, whereas the return on capex for a 25,000 tonne per day operation that might have profitably established a mine on a deposit containing 1 million ounces of gold, the new higher costs, and the likelihood that those costs will resume an upward trajectory, means that a 1 gram per tonne open pit operation processing 25,000 tonnes per day will likely not proceed on less than a 2.5 million ounce deposit.

So a lot of the noise about mining large tonnage low-grade deposits of gold silver and copper is just not applicable in today's environment. By comparing these to long-established operations that are mining low grade material; the average investor could be forgiven for assuming these comparables are valid. That is not the case, and a closer look at the economics of anything claiming to be a near term production story need to be closely scrutinized going forward.