Obama says, ‘There is going to be a tug-of-war within the US between those who see globalization as a threat, and those who accept it’...
Yes, there is.
Among all the factors pushing up prices at the gas pump, the weakness of the U.S. dollar is one of the most important and least discussed. Ultimately, supply and demand set the price of oil, gasoline and all other sources of energy. But the fact that oil is priced globally in dollars also has consequences for American consumers.
When the dollar buys less, Americans pay more for oil. And right now the dollar is weak, its buying power diluted by easy money and huge budget deficits...
[Oil] plunged in the 1980s, when Ronald Reagan and the Federal Reserve under Paul Volcker moved aggressively to tamp down inflation and restore confidence in the dollar. The effort succeeded.
In some ways the world oil market has changed little since then. The Mideast is still the center of the action, and Iran is still the threat at center stage. But it's a different world for the dollar. Budget deficits under Barack Obama dwarf those under Ronald Reagan (and red ink back then broke peacetime records).
The Fed under Ben Bernanke has flooded markets with liquidity every bit as aggressively as Volcker's Fed worked to tighten. Though a weak-dollar policy is not official, it is widely recognized as a fact. Reversing that policy is possible, but it would take commitment and courage that we don't see from the government today.
It's not courage. It's ideology. Call it Obama's Cloward-Piven Energy Policy.
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