Okay, its my turn to vent and rant about what going on in our economy.Earlier this month, I posted a new download for everyone to take a read totitled The Worldwide Effects of theUnited States Oil Crisis. Now yes, this essay contained astrong opinionated view on the direction of the crude oil inflation and outgovernment, and I wanted to touch on this topic a bit more.This month, weve seen oil reach as high as $126 per barrel as of May 12, 2008 (and continuouslyrising). And honestly, I dont see itstopping. Why is it continuously rising? Is it the fault of OPEC? Nope, not atall. Lets take a look at some facts.The demand for oil is steadily increasing.Oil is becoming harder to find I work for Schlumberger and while I do not want to put out too much of the business that goes on around here, there are heavy talks for the constant search for new oil.U.S. Dollar is steadily deflating If you think all of these interest cuts is helping us, in actuality its not.Inflation is rising Speaking of inflation, when it occurs, the general level of prices increases, this includes oil & natural gas.So who is at at fault? Mr. David Gross of Newsweek quoted OPEC presidentChakib Khelil in his article Mismanagement 101: the crudes remarkable run had nothing to do with the reluctance of Persian Gulf nations to pump oil, and everything to do with the mismanagementof the U.S.Economy.Heres the thing. When it comes to being an investor, I love when theFederal Reserve cut interest rates. Stocks go up, investors are happy and buy,loans go down, and a lot of people make money. I, too, have benefited from somepretty nice gains due to rates being consistently deducted. But theres so muchmore to the lowering of interest rates rather than for some quick gains andcheaper loans. After all, where ever theres a good, somewhere theres a bad.What are the consequences of lowered interest rates? Thatleads me to my economist side of thinking. Lowering of interest rates is likeputting a BandAid on a gunshot wound. Sure investors get some quick gains. Yes,loans are cheaper. But all of this also means more money to the money supply.Sounds good? Its not. Take a look at Money As Debt,this documentary goes deep into the process of how more money iscreated out of thin air every single time we take out a loan. As moremoney floods the market, USD is decreased and price level rises. In otherwords, a deflating dollar and continuous inflation. With such occurrences, whatelse do we expect to happen when we visit the gas station and see $4 pergallon?Yes, demand plays a significant part in the price level of crude oil andnatural gas, but inflation is the main front runner of the success of oilstocks lately. You can even consider as to why oil is rising, but gold isfalling.Heres something else that I feel strongly about. While we are experiencingtough times, a bear China Conical twin screw barrel for sale market, and all of these other struggles due to inflation(and deflation in some matters), I feel that this is going to last even morelong-term than some would like to think. Lets hypothetically imagine everyonebowing on their knees and praising Ben Bernanke & George Bush for theirremarkable efforts on rebuilding the economy thanks to seriously deflation ofinterest rates. Well, do you think those rates are going to stay that wayforever? One day, I dont know when but I will guess and say when everythinglooks to be subsiding, interest rates will rise again. It willnot stay at 2% forever. And as the Feds begin to rise from 2% to 2.25% to 2.5%and on and on, investors will not be happy. Businesses will not be happy.
