May 2011

The falling value of the dollar as compared to commodities is cited as an additional factor making oil prices soar. Many other commodities are experiencing the same type of price inflation such as copper, gold and some food staples, especially imported items. Federal Reserve chairman Ben Bernanke announced that the Fed will not raise interest rates after last weeks Reserve Board meeting, causing stock market prices to go down and the dollar’s value against international currencies to decrease. This means that each of our dollars will buy less of imported items such as oil and gas, food, coffee beans, gold, copper (think household wiring and many electrical devices), etc. Wide spread generalized inflation of US goods and wages would likely cause the Fed to raise interest rates. In today’s weak economic environment the Fed’s low interest rate policy is seen as attempting to encourage economic and job growth by making money affordable for businesses to borrow. Let’s hope for growth and not more generalized inflation!

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