Capital Commerce

Raise Interest Rates, and Make OPEC Cry

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Posted: June 23, 2008

I recently had dinner in Los Angeles (Westwood, to be exact) with one of the smartest guys I know when it comes to the commodity markets. "What's the deal with oil?" I asked. His answer: Blame the subprime crisis. That prompted the Fed to slash interest rates. That killed the dollar. And that pushed investors into dollar substitutes like gold and oil. Boost the dollar, and bring down oil prices. Maybe not to $50 a barrel—but certainly to under $100.

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Huh?

How on earth can you say that lower interest rates caused the subprime crisis? Moron borrowers and stupid lenders caused the subprime crisis, and the current low interest rates are in effect to try to bail them out.
They are wasting our money on their stupidity. An uneducated person could say that higher interest rates caused the subprime crisis, but it was the lending, not the interest rates that killed us.

Joe of NJ @ Jul 08, 2008 11:00:55 AM

Well, slashing interest rates is what led to the subprime crisis to begin with. So, blame Greenspan for weakening the dollar by keeping interest rates low, which led to the subprime crisis, which led to more interest rate cutting, which led to a weaker dollar, which led to higher energy prices. It sucks how feedback loops work.

Chris of AZ @ Jun 23, 2008 15:00:48 PM

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