- THE US DOLLAR & OIL -
While the price of oil is high, the US dollar will be expensive. That is because oil is paid for in US dollars. As the oil price eases, so will the US dollar.
It hasn't got anything to do with US productivity. The US can be as productive as it needs to be when there is demand for it's goods.
When demand falls, then productivity eases. If the US dollar falls sufficiently, goods become cheaper, demand will rise & US productivity will rise.
The US is the country where most people in the world would like to live.
People want to live in the USA because they know that they will have something that they do not have in most other countries of the world - the opportunity to work and get rich & the right to dispose of that earned wealth as they choose.
Not have some mad dictator type who will tax & steal it all for himself, or some socialist government that will inflate it all away with idealistic but unworkable schemes, or some liberal or democrat political party hack that will tax it all & give it to layabout voters so that they can stay in power, or some conservative party mandarin who will enacts laws that further entrench the political & financial power of the existing wealthy families to the detriment of everyone else.
(Recognize your country in all that?) Of course all of that also happens in the USA. However in the USA they have a constitution that produces highly unstable power blocks, and produces many independent "heads of power".
Which means that anybody who rorts the system is soon outed and removed.
So the jealous Eurocrats will continue to see their currency slide. So will the Australians, the Canadians etc...
It doesn't matter how much they try to talk the dollar down, it won't work.
If they try to sell it short, they will get their fingers burned.
They would do better to persuade the OECD to increase production, or persuade the USA to sign KYOTO and reduce consumption, or not scream too loudly about Alaska & the Gulf of Mexico.
If more oil is produced than is used, then both the price of oil & the US dollar will fall.
But in the final analysis, the US dollar is strong because most people in the world want to live in the USA. More precisely, they want to live in a country with a government like that in the USA. This produces a strong and growing flood of wealth into the USA.
But in most countries the politicians are too self serving.
Australian politicians know that if they dared to offer Australians a constitution nearly identical to that of the US, then there would be a political landslide of acceptance. And even though the politicians who introduced the referendum would still probably constitute the government, they would lose a substantial quantum of their political power. They would prefer a 50% chance at a lot of power rather than a 90% chance at substantially diminished power.
Look at the bright side. At
least in Australia I will not be shot or arrested for writing this.