CNBC continues to pump those all time high announcements to its dwindling audience. Men on the street are not feeling the joy. It feels weird. Anyone out there 100 years old? Is this what the Interwar Period felt like? We have enough similarities. This fourth turning crisis period is taking time for our modern, ADD audience. I anticipate a dollar crisis. it will come from an external shock of some sort, but with the way the system is now, those exporters who stockpile or recycle dollars can keep stockpiling gold and tangible items (even land). The current garbage dollar regime suits them as long as they can amass money. Eventually, the primary reserve currency crown will be taken away and the petrodollar retired. One thing missing from my estimates and from some analysis is the role of shale oil production.
The shale oil revolution has boosted American oil production to decade highs. That supply expansion combined with our economically depressed consumption (demand destruction), it has caused our daily import number to shrink drastically. Crude oil imports are down 28% from 2005-2006. That is huge on the global market for oil with regards to price as Asian demand has steadily grown since then. A bidding war would push prices up, pushing prices up would increase our oil import bill. If the US oil import bill were to reach 2005 levels in dollar terms, we would have problems. Our trade deficit has the non-petroleum component and the petrol component since we are a major oil importer. Shale production is keeping that number down. Shale production right now is dependent on expanding debt, and the wells have a quick depletion rate. Forbes had a great article on the shale gas play running on cheap debt and fumes. The FED's ZIRP mindset causes malinvestment, and the wizards of Wall Street just pick which idea to boost (telecom, internet, housing, internet 2.0, shale gas). Following the last two links, unserviceable debt will lead to shut downs of wells, which will drop production, which will cause our oil import bill to rise due to physical needs. If we were blowing our trade deficit out further while running huge federal deficits, the other players in the dollar system might revolt.
It is what happened in the early '70s. The shift away from dollars through the 2000s was an echo of that. Kissinger had to create the petrodollar to maintain US supremacy of the system. What is there for a next step? What is the replacement to the petrodollar that was a replacement to gold exchangeability that was a replacement to the gold standard? The Anglo-American bankers do not seem to want a gold standard. The bankers and their crony puppets in the USG, World Bank and IMF are trying to maintain their spot on top of the global hierarchy, but it does not look good for them. If the shale miracle or revolution peters out, watch those annual oil production numbers. Scientists might answer the debate topic of the shale technology change just pulled future supply forward or if it unlocked entirely new production. If the oil import bill climbs in size, the game could be nearing a new phase.