Wednesday, May 4, 2011

Comparing the Two

With the dying dollar should come higher prices, right?  Well it appears the dollar can lose its absolute value, and oil and silver can trade lower.  They have only tested support, and the trading is volatile, but based on recent metrics a devaluing dollar would move them higher.  How is this happening?  Money is running to the Euro.

One may question the Euro, and I would concede that it is just like all other fiats; it is very worthless.  But, while the world goes about its day, pretending to produce the future, the Euro is best of the lame bunch.  The reasons are because their military is not bogging down their collective balance sheets like the US's.  Also, oil is easier to get into the continent of Europe than America, because pipelines from the Middle East and Russia provide easy transportation, and any oil coming into America from those regions must be shipped.  America does have Alaska, but Japan gets the most of it.  America is basically an island when it comes to the world's goods.

Europe had also prepared itself for an oil shock by having a high price established.  This meant people had prepared themselves to not rely on cars.  The use of trains and buses are the norm, and are used more so than in America.  It is a fact that a high gas tax can prevent a price shock from an oil spike, too, because the nominal price is already high, and the percent increase is made less in comparison.

Other than that, Europe and America are in the same boat.  Both have bankrupt balance sheets, and both pretend their days away.  Come one night, out in the elements and without shelter, both will be shocked by the cold, but Europe is better prepared, and the world of finance has obviously recognized this fact, thus why money has flowed into the Euro over the past nine months.

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