…If the Strait of Hormuz gets shut down for any length of time that's going to be a black swan event…and such an oil price and supply shock…would take nearly everyone by surprise. You need to have a plan in place for what you're going to do if - or when - that happens. Everyone does.

…A ?black swan' event is a term coined by Nassim Taleb which has three characteristics:

1. It's unpredictable
2. It has a massive impact
3. Afterwards, everyone comes up with an explanation for it

There's an honorary fourth characteristic which is that virtually no ?experts' saw it coming.

…The world has never been more deeply in debt, nor has it ever had more deeply un(der)funded IOUs in the form of pension and entitlement promises. This is financial tinder waiting for a spark:

The nearly $100 trillion increase in global debt since the beginning of the Great Financial Crisis is an unprecedented act. It was also an act of faith, rooted in the idea that global GDP growth would come along and save the day, or at least rationalize, if not justify, the new massive piles of debt. In truth, this love affair with debt can be traced back to August 15th 1971 when the world abandoned the gold standard in favor of the idea that debts themselves could be the backing for debt.

…As bad as the debts are, the unfunded liabilities ? the IOU's in this story ? are 2x to 4x larger than the debts themselves, depending on the country. In the U.S., the entire collective pile ? debts plus IOU's ? worked out to a staggering 1100% of GDP in 2017. That's ~300% for debt and 800% for the underfunded liabilities.

…The only way to rationalize or justify such a pile of IOUs and debts is rapid economic growth - and the only way to get that is cheap and plentiful oil….so it's as simple as this: the ever-increasing piles of debt (and IOUs) are an explicit call for a larger future economy and. if you want more economy then you are going to use more energy….If you want more global economy with everything shipped hither and yon and 30,000 mile supply chains then you are going to use more energy and more oil specifically. More than 50 years of data says so:

The above chart shows that world energy usage is tightly coupled with economic growth. More economy = more energy consumed. It's linear too. Very easy to grasp, yet most economic experts don't bother themselves with such information. It violates their dogmatic views about the necessary imperative for endless growth, which means it violates literally everything they know and believe, so they don't ?go there.' They falsely believe that economic growth makes energy resources become available. They have it backwards. It's the other way around. Energy resources allow economic growth to occur. Most believe that infinite growth on a finite planet is not only possible, but a good thing, despite virtual mountains of dismal ecological and resource data to the contrary.

Oil is a weird substance economically. If there's even a few percent too much coming out of the ground (supply) compared to demand, the price plummets. If there's even a slight shortage, on the other hand, prices move sharply higher but, given the importance of oil, however, we should not be focused on merely its price, although that's important, but also it's availability. Yes, shortages will lead to price spikes, and those will crush over-indebted countries, companies and individuals alike, but shortages will, by necessity, also lead to less economic activity…

If a war with Iran breaks out, and the Strait of Hormuz gets closed down for any length of time (say, more than a month) there will be a shortage of oil that will lead to a price spike and a physical shortage. How all that plays out in a world groaning under the weight of too much debt is unknowable, but it won't be favorable - or pretty, or desired…

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