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    GRG55's Avatar
    GRG55 is online now iTulip High Commissioner, Select Premium Member, Canada and Persian Gulf
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    Default Re: Saudi gets SLAPPED ! (Oil going to $100?)

    Quote Originally Posted by lakedaemonian View Post
    Agreed.

    Xiís Chinese Navy today seems like a right sized analog to Reaganís 80ís US Navy 600 ship fleet goal.

    Iím all for the US disengaging from direct and indirect kinetic action in the region.

    But you canít have your cake and eat it too when it comes to disengagement and maintaining the exorbitant privilege of the global reserve currency.

    Shifts in bilateral and multilateral network trade volumes are going to be interesting to watch to try and determine what currency/basket/commodity/crypto emerges next, or provides the bridge to get us there.

    While the US is theoretically energy independent, I suspect acting too aggressively/arrogantly/unilaterally could lead to a fair bit of pain.

    I donít think ďdata is the new oilĒ quite yet.

    At least not until we have something to replace oil getting us from A to B that is affordable for folks outside of the Bay Area.

    Maybe Zoom(ZM: NASDAQ) at $20 billion is a cheap hedge someday if we get $100-150 energy and/or pandemic scare again.

    Iíve never traveled for work more than I do now, but I also have never used Zoom more than I do now.

    UAE seem to have made some legit headway towards a post oil world someday.

    But Saudi Arabia is going to have to do a lot more than just writing embarrassingly massive checks in Softbankís Vision Fund to build a sustainable post oil future.

    I am beginning to wonder if the Shah propping up the likes of Grumman(and others) in the 1970ís is being eerily repeated by Saudiís MBS propping up tech valuations thru Softbankís Vision Fund?

    The Shah(his money) was most welcome in the US, right up until he(it) wasnít.
    Sound observations, as usual, lake. But I will gently disagree with the highlighted line above.

    The picture attached to this post was taken by me in the Permian Basin of Texas last Thursday. Five of the six rigs drilling on this pad are visible (the sixth was behind me on the other side of the lease road). This operation is not being conducted by some overleveraged, private-equity-owned, independent exploration company. This is the largest US headquartered multinational. One of the other US multinationals has stated it intends to triple its production from the Permian by 2023, from development on its existing acreage. It is not possible to describe the scale of what is going on here; you really have to see it first hand.

    This is what the USA is so good at. Global disruption at the intersection of cutting edge technology and the world's largest, deepest financial market. These rigs are now capable of drilling 10,000 foot horizontal sections, dynamically steering the drill bit in real time the whole way.

    THIS is what has allowed the USA to apply sanctions to multiple OPEC members and forcibly remove significant oil production from Venezuela, Iran and others from world markets. Something that would have been unthinkable just a decade or two ago.

    The USA was the dominant oil producing nation when it inherited the mantle of reserve currency holder from Britain. So I would question that it needs to remain as heavily militarily engaged in the Middle East as a condition of maintaining that status. I think Martin Armstrong's observation is correct - the amount of money used in trade transactions, including oil, is small compared to investment and Central Bank currency reserve flows globally. And that situation has only been amplified with the enormous growth in global liquidity at the hands of all of our Central Banks since 2008, that is concentrating in financialization of every imaginable "collectable" asset on earth - and that would include Tesla stock and Softbank fund units.

    At some point support for the increasingly odious Saudi regime is going to become politically untenable in D.C. It is the Saudis that were at the centre of 9/11. It is Saudi money that represents the greater threat to the USA because of its enormous funding of terrorism. I suspect it is going to take a) a more coherent domestic energy policy, b) an acceleration in the "electrification" of the US economy, and c) a far more astute, capable, less chaotic, President and Administration, before the USA will have the political courage to pull the rug out from under the Al Saud clan (you and I both know the regime cannot survive without US & UK military support; every Saudi Prince that holds status as a "fighter pilot" is going to bail out on their private jets to the safety of the Intercontinental Hotel in Geneva at the first sign of any real conflict). But I think it is coming. And I think it may be during MBS' turn at the wheel. Iran has always been the more natural ally of the USA than Saudi.

    The world reserve currency will be the one that provides the avenue to the financial and physical assets with greatest legal and political security. As some of the world's most odious regimes band together to try to counter the political and military influence of the USA, I don't see the US$ being displaced from that status for a very, very long time. Even if there comes an Asian currency bloc, led by the RMB, I don't see the outflow of capital and people from that region to a safer haven stopping. It might even accelerate.

    I am also not optimistic the Euro currency bloc can quickly recover from the feckless policies it has been following (for the exclusive benefit of Germany) either - chronic double digit youth unemployment across much of western Europe for years on end is not a recipe for success.
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    Last edited by GRG55; 09-22-19 at 12:31 PM.

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