Gas prices are on everybody’s mind these days… from the already strapped consumer, to the Fed Chairman and even the Senate. As the costs to fill up the ole SUV increases, people are resorting to desperate actions in order to pay for it, while the Fed worries about increased inflation and the future of rate increases, and Senators try to keep their constituents happy. Meanwhile, Central Banks are becoming leery with the Dollar and Iran is still in the Crosshairs.
Knowing this will be a big issue impacting future elections, even the GOP Senate is starting to get excited about the issue: Senators are pushing for $100 gas rebate checks: Most American taxpayers would get $100 rebate checks to offset the pain of higher pump prices for gasoline, under an amendment Senate Republicans hope to bring to a vote Thursday.
The Helicopter man (Fed Chairman Ben Bernanke) spoke today and suggested that a pause in rate hikes is near, but he’s concerned about the recent increase in energy costs—impacting inflation and thus possible rate increases
After the Helicopter Man spoke today, the Dollar slumped to an eight month low on concerns of a rate pause.
Many believe we will see a long-term structural decline in the Dollar due to our indebtedness. (I think we’ll easily see $1.40 + this year)
Foreign Central Banks are already ahead of the game, are aware of this structural dollar decline and have either started to or will diversify some of their Dollar Holdings: Sweden, Russia, Qatar, Kuwait and the United Arab Emirates all having either reduced their dollar exposure or plan diversify in the future. Is this just the beginning?
Ok, we all understand that gas and the dollar are concerns, but we’ll get through it… Or will we? IRAN
Tomorrow the deadline expires for IRAN. The International Atomic Energy Agency will present a report Friday on Iran’s implementation of the Security Council demand. If Iran does not comply, the Security Council is likely to consider punitive measures against the Islamic republic.
IRAN has threatened to retaliate and would strike US targets around the world if it is attacked over its refusal to halt its nuclear program: "If the US ventured into any aggression on Iran, Iran will retaliate by damaging US interests worldwide twice as much as the US may inflict on Iran," the Iranian news agency IRNA reported Mr Khamenei as saying on Wednesday.
So, what (in the near-term) will the US do about IRAN
Personally, I think gas prices are too high today for the US to attack IRAN. The government knows any further disruptions could send prices through the roof and kill the US economy… I believe our government will try to get prices down a bit, continue to work the diplomatic channels w/IRAN (through Russia & China), slap on a few sanctions here & there and slowly continue to rachet up the rhetoric.
With that said, I still think we’ll remain close to or above $3.00 a gallon through much of 2006 (expecially w/ ethanol shortages & hurricane season nearing). The impacts of these high gas prices (working in tandem with a depreciating greenback) will slowly work their way through our economy and will: (1) cause inflation all around (2) reduce consumer discretionary spending (3) increase consumer defaults on payments (4) Drag down US GDP (5) cause our trade deficit to increase (more fiat dollars for imported oil) and cause a myriad of other negative factors.
So, when will we go to war with IRAN and what are some of the potential ramifications of doing so?
John Pike, a military analyst at globalsecurity.org, predicts military strikes in the summer of 2007, safely away from the presidential election the next year. He argues, as many do, that Bush already has congressional approval and needs not go back to lawmakers. "It will be a surprise," he says. "There's nothing like dropping bombs on evil-doers to give Republicans some political updraft."
A U.S. strike on Iran could make Iraq look like a warm-up bout and such a strike would likely push oil prices above $100 (U.S.) per barrel, setting off an economic chain reaction that could lead to global recession. He predicts a certain increase in anti-Americanism in Europe, further rage against the U.S. in the Arab and Muslim world, and a questioning of U.S. ties in Russia and China.