21-11-2007
Dollar fall, a dog wagging its own tail
| As the dollar marks yet another historical low against Euro (Canadians have been smarter than Europeans at voicing their concerns and now their currnecy has lost back roughly 10% relative to greenback, oil approaches 100 dollars a barrel. Historically, every single time Us dollar goes into a freefall, commodity prices rise more than proportionally. That is because commodity prices are expressed in dollars. Us administration and more regrettably the Fed, keep insisting that dollar depreciaton has no inflationary consequences, as they measure inflation excluding food and oil, that is agricultural and industrial Commodities. The theory goes that the price of these items is remarkably volatile. But dollar depreciation has prompted a steady appreciation in their value, not a volatile pattern. As long as the price of Commodities is expressed in dollar, letting the dollar go is not only counterproductive, is unwise. |