Less Bang for Your Buck
Jonathan Herder, Ten Dollar Bank Note (2007)You'll find your fortune falling
all over town.
Be sure that your umbrella, is upside down.
--Pennies From Heaven, Hal Kemp
__________
Speculation and the falling dollar have colluded to raise U.S. oil prices by $20 per barrel. Traders gamble that oil prices will rise, pulling up the current, or spot, price of oil -- "the classic self-fulfilling prophecy (The Oil Speculator Premium)."
Ranger does not claim to be an economist or to understand high finance, but he does remember 9th grade economics and the Law of Supply and Demand, an iron-clad rule when dealing with commodities, be they oil, cocaine or pork bellies.
Obviously there is a higher world demand for oil with the emergence of China and India. America is competing for a slice of that pie, but using shrunken dollars. Even making the pie higher will not change that sorry fact. Not only is the supply smaller, but the dollar buys less. Viola -- the price of a barrel of oil rises $20 just to account for the diminished buying power of the buck.
Oil speculating is not illegal, but the precipitous fall of the USD is criminal. The culprits? All the usual suspects:
- Excessive debt for phony wars
- Deficit spending, both personal and governmental
- Excessive expenditures for non-essential items, ditto.
- Trade deficits
- Shifting economic realities
What can be done to rectify the situation? The first step would be a national dialog to determine if it is in the best interests of America to have a strong or a weak dollar.
Whatever the answer, there must be realistic policies that shape the destiny of the nation. Merely reacting to economic emergencies is not a policy, but a symptom of a diseased infrastructure.
It is simple for the government to preach that a weak dollar favors America, but this is only true because the government is incapable of maintaining a strong dollar. Ranger believes that espousing a weak dollar is the same as espousing the use of wet toilet paper. Neither really pass the test of maximal functionality.
Roberts, the author of "The End of Oil: On the Edge of a Perilous New World," says Washington is loathe to intervene. Meanwhile,
"Iran, for example, is now raking in roughly $5.5 billion extra a month because of the speculator's premium -- cash that could be used to fund any number of nasty ventures, and that could offset whatever economic sanctions Washington manages to deploy against Tehran."
"In the ultimate oil irony, even the merest mention by President Bush of sanctions against Iran is enough to push up oil prices -- and thus to send even more dollars to Tehran."
A strong dollar is more important than a strong Army. That is something you can take to the bank.
Labels: oil speculators, reason for oil price rise, the end of oil
posted by Lisa at 7:13 PM
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