The myth of the so-called "decoupling" continues to be exposed as just that, a myth. Investors, seeking shelter from the strengthening financial storm. Reports of the dollars' demise have been greatly exaggerated. Notice how oil prices have fallen correlative to the dollars' rise. Some credit demand destruction for the fall of oil prices, but demand destruction does not explain the more than halving of the price of oil since its peak of $147.50 per barrel on July 11, 2008.
The reason for falling oil prices are the strengthening dollar and SPECULATION that demand for oil will wane during the coming recessions. I believe that the price of oil will continue to moderate, in spite of OPEC measures to stem its slide (the cartel meets tomorrow). Oil rose too far too fast when fundamentals are considered. Some critics point to the fact that it is not that the dollar is stronger, but foreign currencies which are weakening. I say it does not matter. All currency exchange rates are relative.
Currently, the U.S. economy is perceived to be less weak and better able to weather the financial storm than its foreign counterparts. However, that may not be the case if we continue to move away from free market ideals and toward European-like market socialism. Failure to maintain free market ideals would make the dollar less desirable as a reserve currency.
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