Saturday, July 2, 2011

gas prices - this isn't complex people

look its simple... oil is traded in dollars.  every barrel of oil that is bought or sold in the world is priced in dollars.

when sheik abdul goes to sell a few million barrels, he's left with dollars.  he can't sell them for euros, he can't sell them for yen, he's never left with rubles or pesos.

however almost everything he wants to buy with those dollars can be purchased with every other form of money.  from eggs to ferraris to boats to chewing gum.

so, he wants a strong and valuable dollar, so that his dollars are worth more than everything else, and he can get more for his dollars.

then, we go out and create trillions in debt lowering the value of the dollar... now his dollars are worth less and he can buy less stuff with the dollars he got for his oil.  to compensate, he raises the price of oil.

the more debt we create as a country, the more we force the value of oil down and the price of gas up.

now, some would say that its worth more to have whatever we got for that debt... the government jobs, the stimulus, etc.

the problem is that those things are not sustainable, they are a quick fix.  however, a strong dollar has more value over time, and in more than lower oil prices.  lower interest rates, lower prices for imported goods in general, and nominal inflation to name a few.

so... as your days progress, realize that charity is a good thing, and that the government should support its people, but its not up to the government to do either on a big scale.  we are paying for it either way - if you want to help, don't let the government borrow, spend some of your own money hiring someone else.



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