The weakening value of the dollar makes the Fed give out $600 billion dollars in stimulus. Experts say the currency value will depreciate even more since there is more money circulating in the economy. This makes the cost of energy even higher for consumers.
Rising in oil price means that consumers have to pay more more gas and heating devices.
""The big issue is about consumer confidence. What you pay for gas is a very prominent cost. If oil goes over $100, you could see more concerns about consumer spending," Karl said.
If oil price goes higher, it could induce consumers to conserve cash even more. Matt Lloyd, chief investment strategist at AAM, concedes that it is good, however, since it can put a cap on how much the oil can be.
I agree that this is a big issue regarding consumer confidence. No one likes to see the gasoline price go up. I believe the Fed's move by giving out $600 billion was questionable and this article did not include any reasoning why the Fed is doing this. I would like to see what's the motive of this.
ReplyDeleteThere wouldn't be any problems if we don't happen to rely on private transportation or we have alternative fuel.
There is obviously a conflict in terms of increasing the money supply in the economy and higher oil prices. There is need for the increased money supply but then this also increases oil prices and thus consumer confidence drops. What is the trade off between the two?
ReplyDeleteDoes increased money supply increase consumer spending by a lot more than oil prices? If not then clearly this is not a good approach!