World Financial Watch

The US dollar is weakening for many reasons.  Attributing factors include high gas prices and the failing real estate market.

Rising gas prices are causing American consumers to spend less money on extras than averages in the past.  This causes major companies to earn less profit, making their stocks look less inviting to foreign and domestic investors.  To combat this, the US government has created an economic stimulus package.  The goal is that taxpayers will take this incentive check and use the money on a spending spree, thereby jumpstarting the economy.  Unfortunately, recent polls have shown that many will use the money to pay bills instead.

The Federal Reserve has been reducing interest rates to help stabilize the real estate market and take some financial pressure off of homeowners in hopes of stalling the mass foreclosures of late.  While this does help homeowners, it also deters investing when US interest rates are lower than those of foreign counterparts.

Having a weak dollar is not all bad, though.  Since foreign travelers get more for their money, the US is an ideal vacation area.  Companies also find their prices much more competitive in foreign markets.

While there are positives and negatives for a weak or strong dollar, going to extreme in either direction can be dangerous to the US economy.  With the Federal Reserve keeping a close eye on the direction of the market, it is possible the dollar will begin to stabilize.

The US government has recently introduced a program to help combat the downward spiral of the economy.  The Economic Stimulus Package is free money given to taxpayers in hopes to jumpstart the economy.

$600 to each taxpayer, $1200 to couples, and $300 for each dependent child will be given out.  The hope is that this ‘free money’ will be used on shopping sprees to stimulate the economy, as the proposal suggests.  Another purpose of this package is to help offset the costs of rising gas prices.  At over $3.50 a gallon in places, many people are unable to buy much else.

As far as the rebate checks for individuals go, there are no stipulations on what the money must be used for.

The US government is using $145 billion to pull this off.  Some economics say that this is about the right amount of money needed to give the economy a big enough boost to hopefully avoid a recession.

This package also includes tax incentives for businesses if they make new and major investments during the year.

It is too early to tell if this program will end with its intended results.  As it usually is with the economy, it will be a game of wait and see.

If you have gotten gas recently, you might have noticed that the price of fuel is a little bit on the high side.  Reaching prices over $3.50 in some places, it is only natural to wonder how much higher they will rise.

Many people wonder how gas prices can be so high and the oil companies can make such exorbitant profits at the same time.  Part of that answer revolves around the fact that gasoline is an inelastic product, meaning that no matter how high prices get, the demand will not usually decrease as a result.  It’s a lot like cigarettes… or crack.

The Organization of Petroleum Exporting Countries is a group of countries that produce oil.  The organization basically controls everything to do with oil in those countries, including price.  Now, this group is not a monopoly, but it does control two-thirds of the world’s oil, so it does have some monopoly like powers, and their job is to make sure that investors in oil get the best return on their money.

For the summer holidays, especially Memorial Day and the 4th of July, prices will most likely increase.  This is a long standing trend.  The good new is that they are supposed to level off to somewhere under $3.50 a gallon afterwards.  You never thought you would be so excited about $3.40 a gallon, did you?