Wednesday, August 18, 2010

In economics, what's the relationship between the U.S. housing market, oil prices, and the falling dollar?

How does it all relate?In economics, what's the relationship between the U.S. housing market, oil prices, and the falling dollar?
It's complicated, and the relationships aren't simple ones. But there are some. Due to high nominal US labor cost and rising overseas productivity, much of US manufacturing has moved overseas. This exposes consumers to inflation in imported goods caused when the US dollar weakens. That inflation can squeeze new buyers out of the housing market, which would put downward pressure on home prices. Oil prices will have a similar impact since they cause rising gasoline prices, made even worse by the weak dollar, further eroding household finances.





Another impact of oil prices is suburban/urban. Highes gasoline prices make it much more expensive to commute, which would tend to depress prices of suburban homes and support the prices of homes closer to urban centers. Google 'The End of Suburbia' to find an interesting video concerning one man's theory on suburbia as it relates to peak oil.





The relationship between oil and the weak dollar is more direct. As the dollar weakens (because there is an ever-increasing supply of them) and demand for oil continues to strengthen (while there is a NOT-increasing, and probably decreasing supply of it), supply and demand tell you that the price of oil in US dollar terms should continue to rise generally over time. The same holds true for other scarce commodities with relatively fixed supplies, such as gold and silver.In economics, what's the relationship between the U.S. housing market, oil prices, and the falling dollar?
The banks lent out lots of money for homes. But alot of ppl are not able to repay the banks. So the banks have to be more careful now before giving out loans. So then it becomes harder for ppl to get grants and loans. And when banks get repaid along with interest rates, thats how banks create money.


Few reasons for oil prices. Turmoil in the middle east, oil reserves possibility of running low, money hungry conglomerates.


interesting video about banks and war zeitgeistmovie . com
If the money we claim we have (or will have) is lost (foreclosure), then the confidence in the money goes down. When that value goes down it takes more money to buy things like gas and homes.





Also, supply and demand. We are printing more money so the supply is great and the value is less. China and India are industrializing increasing the demand for oil, so oil costs more.





There are many factors, but these are some of them.

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