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Strategies & Market Trends : The New Economy and its Winners
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To: LLCF who wrote (1570)9/21/2000 12:55:14 AM
From: Bill Harmond  Read Replies (2) of 57684
 
I'm not suggesting at all that oil and gas should trade at the cost of exploration, just that they're not scarce...that reserves are being added at low prices, and that supply can come up to meet demand...hence no lasting crisis from a pure availibility standpoint.

Market adjustments are another matter. It doesn't matter how cheaply it can be found if we need it today and it's in short supply...prices will rise. My position on this is that it is a temporary supply chain issue (because natural supplies are relatively cheap and plentiful), that there is no lasting inflationary impact because the central banks will not monetize it (we learned that one the hard way in the '70's), and that the information economy doesn't have smokestacks anyway.

The business cycle issues are a different matter. Will this financial drain tip the US into a hard landing? I don't think so because the US will be the last to suffer pain from this. The dollar is strong and all oil is traded in US dollars. The Europeans and Asians must all trade their currencies for dollars before they can buy oil. Countries with soft (and declining in the case of the EU)currencies relative to the dollar are taking the hit far more than the US, and if their currencies fail you can bet that US rates will be lowered quickly by the Fed, just like in 1998.
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