Tuesday, June 10, 2008

On Oil Prices, the Dollar and Interest Rates

The Puppy Blender turned us one to an outstanding post about the fall of the dollar.
Higher rates cause the dollar to strengthen, but they also inevitably slow down the economy. On the other hand, lower interest rates are positive for the economy, but often not for the dollar.

Now, our economy has been strong for over five years and the dollar has fallen, more or less continuously during this economic upturn. Coincidence? No.
Read the whole thing. It's simple and straightforward. Well, except for the "strong economy" part. That's probably confusing to Obama supporters. But then, almost everything is confusing to Obama supporters. See also: Petraeus, Gen. David.

Since oil prices are denominated in dollars, much of the rise in the price of oil is due to the weakness of the dollar which is, in turn, due to low interest rates. Now that you know this, I'm sure you'll take the proper steps. Blame Bush.

2 comments:

Kelly the little black dog said...

Great blog. He makes a good argument for a steady increase, but I still think something else is superimposing on top of this to give us the recent spikes.

K T Cat said...

Kelly, you had the rest of the puzzle in your excellent blog post about China and India subsidizing gasoline for their citizens.