All of the talk is that higher oil is inevitable... And the usual suspects are to blame... The Arabs in OPEC. The new Chinese consumer. Lack of drilling and discovery...
But THE REAL REASON IS ALWAYS IGNORED...NAMELY, THE WEAKER DOLLAR...
Oil is priced in dollars so the relationship between the dollar and oil is purely economic... A weaker dollar will cause oil to rise...a stronger dollar will cause oil to fall...OIL AND THE DOLLAR ARE JOINED AT THE HIP...THEY LITERALLY DEFINE EACH OTHER.
So all this talk about a rate cut...or anything else is just blowing smoke past the real problem which is a dollar that is a macroeconomic basket case... A dollar that's totally dependent on the kindness of strangers...mostly at Asian central banks.
BY THIS SPRING THE FED WILL BE FACING A DOLLAR CRISIS OF THE FIRST MAGNITUDE...
BERNANKE WILL BE RAISING RATES TO BRING DOWN OIL AND BOOST THE DOLLAR...AND ALL THIS GOLD BASHING WON'T HELP...
AT SOME POINT THE PROBLEM OF THE WEAK DOLLAR WILL NOT BE "SOLVED" BY GOLD BASHING... THE TRIP TO CHINA BY AMERICAN ECONOMIC LEADERS TODAY IS SIMPLY A SIGN OF DESPERATION ON THE PART OF WASHINGTON...
AS IN IRAQ...THE REAL PROBLEM IS THAT THE US GOVERNMENT AND WALL STREET HAVE NOT BEEN OPERATING UNDER "NORMAL RULES"...THE MYTH OF AMERICAN EXCEPTIONALISM IS GOING TO BE SORELY TESTED IN THE COMING MONTHS...
