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The Falling Dollar

April 17, 2008

Fiat money isn’t worth the paper it’s written on and the US$ is fiat money. We’ve known that but now the rest of the world is catching on. Want to know why oil prices keep going up? The simple answer (other than greed) is that the US$ keeps going down, down, down! That’s not the worst news. Soon, oil will be traded in something other than the US$ and then we’ll really see a mess!

Who Wants Cheaper Auto Insurance?

On October 25, 2007 the US$ stood at $79.70. As the market closed on Wednesday, the dollar had fallen like a rock to $71.41. That’s more than a 10% drop in less than six months. That means the oil producing countries need to be getting at least 10% more and at $100 a barrel, is there any wonder oil is being priced at $113.00 today? And going higher as the US$ goes lower.

And then we have to add to that the rising rate of inflation, which is increasing also!

Annual inflation in euro nations rose to a record 3.6 percent in March, boosted by higher prices in transport fuel, heating, dairy products and bread, said Eurostat, the EU’s statistical agency. It is the highest inflation rate in 16 years.

Olivier Jakob of Petromatrix in Switzerland said there had been a “very strong correlation” between rising oil prices and the weakening dollar in the last few months, which appeared to have been broken at the start of this week. “Monday and Tuesday crude oil managed to move ahead without the help of the dollar,” Jakob said. “But once we broke above 1.59 euros per dollar and as we move toward 1.60, there’s going to be more buying coming into oil.”

Analysts said growing investor demand for commodities — which have performed better than other financial instruments — also helped prop up prices. Can you say gold?

Oil’s recent run above $110 a barrel has been largely attributed to a steadily depreciating U.S. currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold. Last week’s EIA report showed an unexpected drop in crude inventories, which started oil on its way to several records.

Gasoline inventories were expected to decline 2 million barrels, to post their fifth consecutive weekly drop amid increasing demand for the fuel, the survey showed. Gasoline demand typically starts to increase at this time of year, but high prices at the pump and a slowing U.S. economy appear to have dented the pace of demand growth.

The “a href=”http://www.transformhouston.com/archive/can-do-cantina.php”>Can Do Cantina (print as much money as we want) is closing!

Attracting the most attention was the closure of Mexico’s three main oil-exporting ports on the Gulf Coast because of bad weather that started Sunday. Only one of the ports remained closed Tuesday, according to Mexico’s Communications and Transportation Department.

The USA golden era is over! No more free rides by just printing money whenever we wanted.

Written by Ernie · Filed Under Daily Commentary 

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