With interest rates hovering close to zero and true inflation much higher, the bond market is poised to have its bubble burst. The talk of energy independence of the U.S. is smoke and mirrors. I expect $3.75 natural gas to become history when exploration companies finally run out of cheap money to drill expensive wells. These horizontal gas wells are not economically justified at the current price level. We need $6-8 natural gas to truly break even. But when the investment alternatives are so poor, investors tend to seek out the best “ugly” investment in town. Natural gas drilling is the beneficiary. Other countries are willing to pay up to $15 per MCF for natural gas so there will be some of the US natural gas shipped to those countries via specialized tankers.
Global commodity prices will reflect the US Dollar’s depreciation. Other currencies are becoming “reserve” currencies in practice. The demand for Dollars will decline causing further depreciation of value for those who hold them. Couple that with US Government Bond yields and you have a serious problem. When the bubble pops, the Federal deficit will skyrocket due to higher interest expense on the massive debt level. In the private sector, bankruptcy is the only solution. I wonder what these guys will think of when the day of reckoning arrives? Those retirement accounts are looking yummy!