Uncle Sam in deep waters

Recently,I read an article by Martin Feldstein, Professor of Economics,Harvard posted at his blog named a tale of two monetary policies.It commented on the monetary policies by the European Central Bank and the Federal Reserve to rein in inflation.It was interesting to learn that both were facing similar problems but pursuing different policies.Fed had cut down the interest rates and ECB had increased the same.I have my own bit of reasoning to believe why the Fed decided to take a different route altogether. I understand that the Fed does not want to raise interest rates because that would just plain hit the economy in the gut with the left fist. The politicians would scream. The people would go mad.But when the Fed wimps out, the dollar declines in value. And the cost for foreign imports, such as oil, rises. That hits the economy in the gut with the right fist. One way or the other — a left or a right to the gut — our Uncle Sam is getting beat up.The only medicine that one could prescribe is the stabilization of dollar.Its simple if the dollar stabilizes, oil should level off. And we could see the market begin to recover.But mind you this itself is a hard nut to crack! But let me discuss this in terms of energy and oil and in terms of Rising U.S. Energy Costs…
In June, as you know, the price of oil just rocketed up (as the dollar fell). I follow oil like a hawk, and even I was astonished at the pricing trajectory. I really thought that profit taking and the general negative impact on the world economy would have to slow down oil’s rise. But no, oil kept moving up.Of course now it took a back seat.But then I kept wondering at that time… Who the heck is buying this oil? Are you broke yet?But somebody is buying the expensive oil, and we are in the midst of the greatest transfer of wealth in history. Entire nations are being impoverished. Interestingly,other nations are being enriched beyond their wildest dreams.
Rising energy prices, and the related transfers of wealth, are among the great strategic movements of our time. Since the dawn of the oil age, U.S. has had some semblance of control over energy prices. Heck, at one point, prices were so low that the state of Texas empowered the Railroad Commission of Texas to stabilize prices.
It’s a long story, but the West has, more or less, always had a handle on energy prices, even in the face of OPEC, over the last 40 years or so. At the end of the day, the West could have faced down the major oil exporters and kept some sort of lid on the upside of energy pricing. Not any more.
The people who sell oil are, of course, more than happy to take US money. They are ecstatic, truth be told. In a matter of a few years, Western energy demand is moving the wealth of many generations into new hands. Some nations are getting rich, while others are getting poor — fast.
A few years ago, Russia was a post-Soviet basket case. Now the Russians are buying up much of Western Europe.
A few years ago, the United Arab Emirates was a dusty backwater. Now the UAE is becoming a world destination, and its sovereign wealth fund is buying the Chrysler Building in New York.
Meanwhile, expensive oil is breaking the backs of the middle classes in the U.S. and many other countries. Wait until next winter, when millions of households in the U.S. and Europe cannot afford to heat their homes. Ugh!
And world economic growth is stalling as oil prices rise. So it really seems as if the rising prices have to moderate and it actually did .Finally, a breather. Whew! .Whatever my point is straight n simple and it is a opinion shared by many, the cracks in US economy are getting deeper and there is very little it can do to regain its glory of the 90’s .Its showtime for the third world . We all know every dog has its day.And I would like to believe that Uncle Sam knows it well too.