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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: BEEF JERKEY who wrote (16233)	7/6/2004 9:38:35 PM
From: Cogito Ergo Sum	Respond to of 110194

at this moment it is a little mor ethan the USD weakness investorshub.com

To: BEEF JERKEY who wrote (16233)	7/7/2004 12:19:41 AM
From: Jim Willie CB	Read Replies (1) \| Respond to of 110194

the oil price is not really reacting much to the US$ it reacts to interruptions in Iraq to Nigeria strikes to Norwegian strikes to Venezuelan marxist insanity but the undercurrent for oil price is Chinese and Indian demand not US demand Chinese imports are growing at 15-16x the US demand !!! as for the US$, its decline has created a growing price band for OPEC oil price which is not so important in short-term ANYTHING but is very important in long-term EVERYTHING / jim

To: BEEF JERKEY who wrote (16233)	7/7/2004 12:30:33 PM
From: Wyätt Gwyön	Respond to of 110194

Letting the dollar weaken does not correct the trade balance if the price of oil goes up in US dollars as this occurs. if you think about the relationship between trade balance and currency, you will see that a declining currency by definition causes import unit prices to rise. so, for a given amount of nominal dollars, the US should buy fewer imports, including oil--in fact, due to the higher prices, US dollar-based buyers may be expected to perceive less value, thus curtailing their consumption even more. at the same time, unit prices of US goods (in the eyes of foreign-currency holders) should go down, with the result that foreigners buy larger unit volumes, and perhaps see greater value and buy greater nominal dollar amounts as well. if these two traditional aspects of currency devaluation take place, ceteris paribus, one would expect the trade balance to correct. however, in the case of US, consumption has not been curtailed. for oil, this probably has to do with the very historically cheap starting price of oil. in real terms, oil reached over $80 per barrel in the 1979 oil shock. looking at it from the other side, consider that per capita income in Saudi Arabia has declined from more than $28,000 several decades ago to something in the neighborhood of $10,000 today (i think it is even less but do not recall--you can look it up). so, for them the weakness of US dollar must cause more suffering (a relative word, perhaps, for princes with a minimum monthly tax-free stipend of $25,000, but let's not forget the many poor people who must be thrown some dinars) than a rise of US gas prices to the $2 range for Americans, in a world where most developed countries have gas prices of $3.50 per gallon or higher. (this agrees with your first sentence, ne of the things putting upward pressure on the price of oil (in US $$$$) has been the relative weakness of the US dollar). So many imbalances have to correct themselves - the huge consumption by the US of the world's oil being just one. getting back to that issue, US oil consumption has grown impressively over the last decade and still accounts for 25% of world demand. basically, the only thing that will slow this growth is MUCH higher oil prices (probably $50 or higher, and eventually more than $100). perhaps environmentalists should thank Bush the Dull for accelerating the advent of the third oil shock by fomenting crisis after crisis in the Middle East.