from the hip

Following the coverage of the current crisis in the US, I strongly feel the news media in the US attribute far too big a role to the current prices of oil as a factor causing or contributing to the recession.

For instance, New York Times a few days ago published a graph showing the inflation adjusted price of oil, and pointed out that oil now was more costly than in 1980, and at its highest ever price (after the most recent price adjustments) (illustration from New York Times):

While this is obviously true, it is also only true when viewed from an American point of view. If the declining value of the dollar in international currency markets it factored in, oil is actually still 30-40% less expensive now than it was in 1980.

So to my mind, Americans, and most certainly American media, are looking in the wrong direction when explaining the crisis to the American public. To the extent that their explanations are believed, this may slow down the appropriate and necessary adjustments to the current challenges facing the American economy. It is necessary to look elsewhere.

More to come!