Oil Prices and Stock Gains a Result of Falling Dollar
Several things can effect the value of a currency, and things leading to a fall in worth typically include:Â low interest rates, large government deficits, heavy consumer borrowing, and a sense that money is being spent on less than productive investments.
Depending on your perspective, this may be a good thing or a bad thing.
A falling dollar claims to make debt easier to pay back – but the experience of Japan through its series of bubbles and stagnation undermines that theory.
The practical fact is that stock prices and oil end up moving upward together. Despite the fact that business gets more expensive in many ways, people looking for something to spend dollars on will inevitably buy equities and commodities until the cost of the commodities seizes up the economy and triggers another deflationary spiral (remember what happened when oil hit $150 a barrel?)
Unfortunately, the goal of the Federal Reserve seems to be an attempt at bringing us back to that precipice and hitting the brakes this time. Why we need to go back to the edge of the cliff at full speed before hitting the breaks – well, I’m not so sure.