Monday, November 8, 2010

Unattended Consequences

Oil prices are responding to the Federal Reserves recent announcement for further quantitative easing. Oil is a global commodity that is denominated in dollars. As the Federal Reserve continues pumping money into the economy and the dollar depreciates oil producing countries are finding themselves with decline oil revenues. I've always said that the economy will continue in it's recovery (albeit weak) as long as oil prices stay under control. High oil prices place greater burdens on households and weaken an already low consumer confidence. This could spell trouble with the upcoming travel season.

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