I try not to get too educational, so I apologize in advance. I watch a lot of news and read a lot of news, so I might as well try to make it worthwhile.
Oil is $110 a barrel. That’s a lot.
Why did this happen? There are zero supply side concerns. How did we hit record oil this week? It’s all about how much our dollar is worth compared to the currency of other countries.
Our dollar is in the tank. The government is printing money to pay for never-ending war, lower interest rates and our precious tax rebates.
To us, this money just magically appears. To other countries, we’re just issuing more physical dollars that represent the same total wealth of our nation. You can’t take poker chips out of your pocket at a poker game and expect everyone to be cool with it. Your poker chips are now worth less. Oil costs more as a result.
That sucks.
But the good news is that prices for other products and services haven’t changed too much yet. This brings foreigners in for the cheapest American vacation they will ever get. All of their money is worth more if they spend it in America. This makes other countries order more of our shiite, and makes us buy less of theirs. As this real money comes in, our true wealth increases, and the dollars we printed will magically have value.
As long as we don’t do anything really stupid (hello Iran!), the economy will fix itself.
Sorry for being boring.