Americans – as are we all – are most disturbed about the rising cost of gasoline now in the neighbourhood of $1.30 cdn. plus for a mere litre and in the case of the US – $5.00 a gallon.
We are right to be concerned since high oil costs will spell the end of our fragile economic recovery.
But Obama is wrong in his thinking that his Investigation will discover mass speculation – rather the cause of the on going spike is Obama’s own policies.
To be more precise – it is due to his out of control spending and out of control printing of money.
These two policy initiatives have combined to devalue the US Buck and since the world commodities are priced in US Dollars – the faster their buck drops, the faster the commodities rise in price.
Simply stated – if the dollar drops 10% in value – the price of a barrel of oil can be expected to increase by 10%.
So that in a nut-shell is the problem. Obama can save some money by shutting down his inquiry before it even begins.
And it is not just things like Oil that are going up.
Gold and Silver are on a tear too. This week Gold surpassed $1,500 an oz while silver soared to nearly $50.
One Wag was quoted in the Financial Papers today as saying these Rare Minerals are due for a collapse because they have risen too quickly.
He points out that their rise can be attributed primarily to all the media attention it has been getting – i.e. Gordon Liddy’s “Buy Gold Now”. That is to say – that sales have been artificially spurred up.
But like Obama, he has got it wrong.
These metals are continuing to rise in value in parallel with the increasing US and European Debt and with their declining currencies.
You will know that earlier this week Standard and Poors placed the USA on a Credit Watch the end of which will likely see America’s credit rating diminished. Such an action will see their cost of borrowing increase which in turn will see their debt rise and dollar devalue even more.
It goes on and on.
Look at Greece for instance.
In order to sell their Bonds – they are now obliged to pay 23% interest and even at that – they are not getting many takers because the financial community knows that the end result will most likely be Default in Payment.
What a mess.
And until the West gets its financial House in Order – it will most certainly continue.
As will the Rise in Oil and Gold.
As I see it….
‘Galagher’
