Economic Warfare

[Shek]

Great point! The 1970's saw the forequakes of global peak oil production; the real thing will likely occur sometime in the next 20 years (today, perhaps). The 1970's saw the first great US dollar crisis, foreshadowing the real thing which lies in our future (today, perhaps).

The 1970's were a difficult decade for America. And the next few years...

The geopolitical implications of this could be immense. The great emerging powers will certainly take advantage of any weaknesses in America's power.

Peak oil is a doomsayer's tool. As the price of oil increases and settles at a higher level, the profitability of extracting oil from non-low hanging fruit reservoirs will arrive. While the absolute amount of oil will decrease, the relative amount will continue to increase. As the price goes higher and higher, it will also provide the profit incentive for more serious research on alternatives (and better alternatives than the fallacy of ethanol, which has served to drive up food prices and beer prices ).

Also, let us not forget that some of the pain of the 70s was due to poor fiscal policy choices in the 60s coupled with the fallacy of price controls and a weak Fed response. In some sense, years of inflationary policy along with supply shocks created a perfect storm, and ship captains bungled the response. While there may be some parallels to a "perfect storm" scenario now, you have a Fed that is much wiser as well as much more credible, so I'd be careful in drawing too much off of the experiences in the 70s. Besides, you can look at the rapid rise of the price of oil in the past few years, we have already allowed an oil "shock" to transmit through the economy without seeing the same adverse effects of the 70s.