By Antonio Graceffo, PhD.
The Financial Times reported that “Italian and Greek borrowing costs jump on eurozone rate fears”. These countries not only have high debt, but because they are on the Euro they do not have independent monetary policy. Unlike countries with a sovereign currency, they don’t have the option of printing money to fund a fiscal deficit. Not that that is a good strategy, but it is one more option which countries give up by adopting the Euro.
Meanwhile, the dollar continues to rise, while the entire globe suffers with high oil prices.
A strong US dollar has historically put downward pressure on oil prices, but that hasn’t been happening lately. The US dollar has strengthened to a 20-year high, while crude prices have skyrocketed 62% in 2022 as Russian supplies disappear. Combination of a high dollar and expensive petrol is doubly bad for people outside of the U.S. For example, the Indian rupee is down 40% since 2005. During the same time period, oil is up 210%, making the rupee price nearly 3 times what it was in 2005.
#economy #currency #oil #echange #Monetarypolicy
