Let us take a 25 year view. One generation or so. Let us put ourselves right in the middle, here, in 2011.
12.5 years ago Oil was going down like a rock in a pond, Nasdaq was screaming to the stars, everybody had a job and everybody expected to get rich by buying a house, leasing a Mercedes, and starting a dot.com. You were nobody without an MBA from a prestigious institution (unless you were a Billionaire... even self made multi-Millionaires - doctors, lawyers, small business owners - were second class citizens).
Over the next 5 years, until 2005 or so, the stock market tanked, then rebounded, and the housing market went ballistic. While on very few people's radar screen Oil was making its way higher. Not alarming at first - until it crossed the magical $50 line and Goldman's Murti called for a super spike - maybe as high as $105. A little known brokerage firm in Boca Raton, FL, with yours truly's name on the door tried to tell this story to the individual investor. We made a good living peddling the story... but most people thought I was out of my freaking tree (this is 2000, mind you... many of my old staff read here regularly... most of them thought I was out of my freaking tree, too. It was a hard sell. The Euro was in the crapper, Oil was, too, and the US$ was ascendent. Then came Ken Deffeyes' book "Hubbert's Peak" which gave us some cover, but not enough to make sales.)
From 2005 - 2008 the battle was on. The Fed tried to expand credit, destroyed the financial system, and Oil took flight from $50 to nearly $150. The fight raged between the Cornucopian's and the Cassandra's. The price collapse in late 2008 and 2009 gave the Cassandra's the upper hand, only to be TKO'd by $100 plus Oil in 2011. Over the 2005-2011 housing crashed, banks crashed, precious metals flew, Oil seesawed ever higher (average yearly price, that is), and the U.S. worker earnings crumbled.
Pretty much what the Cassandra's were saying would happen in a fractional reserve banking system given the end of Oil supply growth. Not exactly, and not in line with the more vocal fringe doomers... but close enough for government work.
With me so far?
Oil and the housing crash were coincidental... sort of... for the most part. Oil's price rise certainly put a crimp on extending the housing bubble, but these were 2, very independent events.
Taking that into consideration, I think the end of steady growth in the supply of Oil has had a tremendously negative effect on the U.S. economy over the past 6 years. It is very likely (to me a near certainty, but you never know) the next 12.5 years will see a dramatic decline in the supply of Oil to the industrial West, and the U.S. in particular. Perhaps within 15 - 20 years Oil exports, and therefor imports, will cease altogether.
Looking back on what happened to the U.S. economy when Oil supplies ceased growing and comparing that scenario to one in which Oil supplies are cut by 50% or 60% (imports into the U.S. cease other than those from Canada) is going to take some amount of abstract thinking.... and a willingness to refuse to suffer a failure of imagination.
Markets will tell you all you really need to know IF you pay attention and do not take in only the data that supports your prejudices. Silver and Gold seemed to be predicting some type of currency crisis... yet homesteads, livestock, gardening equipment, "prepper" gear... were all going begging. There is no doubt in my mind that the world's currency system will absolutely, positively blow up at some point... but that point is likely quite a few years out; and you will be able to know when it is real - when consumer goods are in short supply and family farms have become quite dear, the currency crisis is upon us.
That this will unfold at some point I have little doubt... that it will happen in the near future is almost completely up to the politics of the MENA - something that is difficult, if not impossible, to call AND profit from.
-to be continued...
P.S. I pick up my bee hives tomorrow morning. I am very excited about this new addition to the farm.