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Veteran Advisor

Re: About that dear gasoline

Morning Canuck Yes expensive oil will ruin our economy. and it will do it at lightining speed.  I'll give you the data very shortly.  Your economy is getting a big boost as your currency is stronger than ours so when we buy oil you get the benefit of our weak dollar.  IT is a win win for you guys. Maybe I should become a canadian eh?

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Veteran Advisor

Re: About that dear gasoline

Ray.  The things you mentioned are all true whne compared to each other. But when they are compared to the American wage earners buying power the argument falls apart. Be safe I'll expand later. I better go feed cattle.

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Senior Contributor

Re: About that dear gasoline

"If cheap fuel is what it takes for you to improve your economy then you are doomed. The age of cheap fuel has come and gone.

Time to catch up to the future the past is past."

This is the exact same thing we heard back in the 70's.  Coincidentally, the U.S. dollar value was making an impressive low from 1978-1981.  Corn was trading near $4.00 in 1980 with a 1.6 billion carryout.  By 1985, the U.S. dollar had made an impressive rally.  Crude oil was trading below $10.00 while corn was trading at an impressive $2.20 with just a 677 million bushel carryout.  By 1988, the U.S. dollar had once again fallen.  Crude oil jumped back into the $30's while corn pushed back into the $3.60's.  The U.S. dollar made another pretty decent rally topping out in 2002-2003.  Crude oil fell below $20.00 a barrel while corn prices were south of $2.00.  The U.S. dollar once again drifted lower from this time frame causing crude to cruise higher as well as corn.  It was 2005 when the U.S. dollar flirted with 80 on the index.  Coincidentally, 2005 is also the year both corn and crude oil started making significant rallies with crude pushing above the $40.00 a barrel ceiling that had held for so long.  

I guess all you guys are right.  The U.S. dollar has absolutely zero correlation to commodity prices.   

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Senior Advisor

Re: About that dear gasoline

I think part of the argument is which end of the dog is which? The oil cartel is an active agent in prices, not a passive leadership as it was prior to the 70's. They will try and extraxt value from a devalued $, and they can. But during previous 'oil shocks' we were in inflationalry periods. It would be hard to argue for the western economies at this point. Previously we didn't have the surge from the global developing economies. This is a new factor in its scope. And their development is real productivity and value.

 

And if you want to argue CO, hard to make a parallel with your outlook. We are not in an inflationary period, we are low oin stocks and the future looks risky in terms of abeing able to produce enough year after year w/o slip ups. I think we'll do it, but there are going to be slip ups. Meanwhile the $ is still a haven - w/o inflation and high interest (the conditions during the times you refer to). These all argue against a simple correlation between fiscal policy and prices. For that matter, the real value of commodities now is not very high compared to former situation you reference. Run them through the CPI calculator and you'll see what I mean.

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