☕ John Tamny’s latest at Real Clear Markets offers some intriguing insights into the price of oil, fracking and the price of gold.
Indeed, the price of oil plummeted in the 80s and 90s despite the efforts of OPEC, and despite the happy truth that more and more of the world’s inhabitants were increasingly tasting the fruits of freedom, personal and economic. Despite growing prosperity that logically increased demand for economic inputs like oil, crude descended to a modern low of $10/barrel in 1998. Unlike the 70s when equity markets mocked the presumption of economic health, they surged in the 80s and 90s.
Ok, so what happened. What changed between the difficult 70s and roaring 80s and 90s? The difference was that in the 80s and 90s Presidents Reagan and Clinton made a strong dollar their policy. And with the dollar strong, oil priced in dollars fell. There was no “fracking” revolution to speak of then (the U.S. energy industry was largely on its back, a fraction of its 1970s self), but there was most definitely a revolution in computer, software and internet technology alongside two booming decades for U.S. stock markets. When the dollar is in good shape, investors can more comfortably put money to work in pursuit of new wealth creation.