Reply #5: The capacity may not be there to undercut the competition.

[hunter]

There's some good evidence that world oil production is running full throttle -- that there's no reserve capacity. There's a curve of maximum profits to be had as we pass peak production.

But since the dollar is so intimately tied to oil, the calculation of this curve gets very slippery, and the market becomes irrational.

I think this is the root cause of the U.S. dollar's troubles, not the collapse of the home loan bubble. The decisions leading up to the home loan fiasco, and even the war in Iraq, were probably made to cover up something worse: the imminent peak and decline of Saudi and Mexican oil production.