How a Fed rate cut raises oil prices

[jpak]

http://money.cnn.com/2007/10/29/markets/fed_oil/index.htm?section=money_mostpopular

NEW YORK (CNNMoney.com) -- If you think oil prices are high now, wait till Wednesday.

That's when the Federal Reserve is set to announce its decision on interest rates. Most say a cut is coming.

"If the Fed cuts rates, it will probably push oil prices higher," said Adam Sieminski, chief energy economist at Deutsche Bank.

There are a couple of reasons lower interest rates usually cause higher oil prices. The first is lower interest rates are designed to spur economic growth by making money for investment cheaper to borrow. Stronger economic growth usually entails using more energy, so traders bid up oil prices on the expectation of higher demand.

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[phantom power]

1. This decoupling of petrodollars back into "petro" and "dollars" is going to be bad.

Not that we didn't ask for it. But it's going to be bad.

[Javaman]

2. it will be interesting to see what they couple the dollar to next as the new standard.

first it was gold, then it was oil, then it's???? ethanol? LOL

a currency that has no basis to which to value it's funds upon, is worthless.

so if I trade in a pound of dollars with no standard what do I get in return? a pound of paper.

[phantom power]

3. I'm more than a little worried they'll just throw up their hands and start printing money.

In which case we could end up with an economy resembling the Weimar republic in a big hurry.

[Javaman]

4. I think the new wheelbarrows are now coming in leather. LOL nt

[Maven]

5. The myth of speculators driving up prices

is another excuse to avoid facing facts about oil depletion, or so says an article on The Oil Drum today. Weird coincidence, no?

http://www.theoildrum.com/node/3157

[Maven]

dupe

[Maven]

6. dupe again (stupid mouse)

[NickB79]

7. The Feds just voted to cut the rate by 0.25%

http://news.bbc.co.uk/2/hi/business/7071813.stm

Odd, I just got the same feeling in my stomach that I get every time the roller coaster reaches the top of the hill.....