Dollar's Decline - Oil to Soar

SUBHEAD: What current Fed dollar actions mean for Hawaii. At $100/barrel things will be looking bad.

By Brad Parsons on 5 November 2010 in Island Breath -

Image above: What's the worst case scenario. The streets of Waikiki are empty. From (

Today, the futures price of a barrel of oil rose again to above $87. As expected, it has been rising since Federal Reserve Qualitative Easing (QE2), buying government bonds with digitally created money out of thin air, began earlier this week. That is because of the logically expected reduction in value of the dollar, regardless of how it is described, a deliberate devaluation of the dollar, eventually creating inflation, whether officially measured or not.

Looking at the chart below, the beginning of the most immediate recession coincided with the price of oil rising from a similar current price to $100 a barrel in October and November of 2007. The recession was dated to have begun in Nov. 2007. QE2 is suppose to stimulate the economy, but with banks holding onto excess liquidity, QE2 is instead devaluing the dollar, raising the price of oil in dollars, and can be expected to further worsen the economy when the price of oil approaches $100 a barrel again.

Below is the futures price of an ounce of gold. From October 2008 it has risen from about $750 per ounce to as of today rising to approach $1400 per ounce. This too is in expectation of inflation on the dollar, regardless of whether officially measured or not.
For Hawaii, as we have written before, Fed monetary and U.S. Government fiscal actions, whether reasoned or not, have been escalated such that the dollar will lose value, oil priced in dollars will cost more, transportation and all other services dependent upon oil and gas fuel will go up in price, and price elastic demand will go down for services including a higher fuel cost component. This will all be very bad for cost of living in and tourism to Hawaii.

We are already seeing that the surge in tourism to Hawaii of the past summer that lasted into September, has dropped off in late September, October, and early November. Expect markets and tourism reports in the months ahead to verify this, and Oahu economists to write about it... after the fact.  


1 comment :

Anonymous said...

Mahlo for sharing. This is real talk, it all makes sense and we need to be taking this to heart and both proposing how we can change things if/when the proverbial sh!t hits the fan in this regard.

There are too many people unaware of the real dangers of that are likely to ensue because of the actions of a few people/agencies that are in places of power. It is time to take back responsibilities and get together on a local level and be ready for what may come.

We may not be able to change the decisions being made in the short term as individuals but together we can and will find a way to prepare ourselves. This is REAL, we are in the midst of grand transitions and it is only sensible and logical to become aware of this change and get prepared.

I am so grateful for Island Breath and for all involved in raising the awareness. I do not currently live on the islands though I have invested interest in what happens there as my family intends to move there in the not too distant future. Again, I am grateful for what you wonderful folks do at Island Breath, keep up the great work!


~Joe Culhane

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