It isn’t that the Federal Reserve is some evil conspiratorial group – it is an example of central economic planning. The economy is slowing, so they pump more money into the economy. The problem is, with more of a money supply, the value of the dollar slowly declines, just as the value or price of oil would slowly decline with a bigger supply. The government is notoriously bad at running the economy – not just our government, for that matter, but governments in general.

Government intervention in the free market is bad in general, but pumping money into it at this point is particularly harmful because we are in a deficit – meaning any money pumped it will have to be created or borrowed with interest.

And the price of oil is an effect, not a cause, of the devalued dollar. Afterall, the price of oil when exchanged to gold has actually been pretty steady – from 2000 to now it is more or less the same price, whereas in dollars it has jumped from, what, around a dollar to a little under 4 now?

Rangeley on August 30, 2008 at 1:39 PM

Then gas prices would be cheaper in Europe correct? Where the Euro is out performing the dollar. Check those gas prices and see if your theory holds out.

Well, things aren’t quite so simple. The Euro may be stronger then the dollar, but it is actually losing value too as their central banks are practicing the same sort of devaluation-for-economic-growth that is going on here. So their prices have been increasing too.

That aside, the price of gas in Europe is much higher then here for one reason – gas taxes. Taxes account for, on average, 70% of the price of gas in the UK and France, for instance, while it is 11% in the United States. So if you take out taxes for both – yes, their gas actually is cheaper.

Rangeley on August 30, 2008 at 1:55 PM

http://www.econbrowser.com/archives/2007/11/oil_and_the_dol.html

Paul/Rockwell do not know what they are talking about, they only care about Anarcho-Capitalism and seeing the USA as an “Evil Empire”

I sort of addressed this earlier – other central banks are printing more money to cause growth too. It has nothing to do with “evilness,” and everything to central economic planning being implemented in more places then just here.

A more suitable graph is one that looks at both currencies, and a hard commodity, like in this case, gold.

http://bkmarcus.com/blog/images/charts/OilDollarEuroGold2007.png

As you can see, yes, it has increased for both the Euro and Dollar since 2000 – not as much for the Euro overall, but at times it has gone up at even larger rates then the dollar.

Overall though, the Dollar has been devalued more – as born out by the fact that the Euro has increased in value per the dollar. Its like two sinking ships – the slower sinking one will be higher up then the faster sinking one, but both are still sinking.

Meanwhile, with gold – or for that matter, with a dollar that hypothetically had not been devalued – the price of gas has stayed pretty flat considering all the fluctuations in oil supply and instability.

Rangeley on August 30, 2008 at 2:38 PM