Oil prices pressuring the Fed

Essay by EssaySwap ContributorUniversity, Bachelor's February 2008

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Should the Federal Reserve raise interest rates to compensate for the soaring prices of crude oil? Many people seem to think so. Historically, hasn't it worked in past? Remember the first Gulf War? The Federal Reserve raised interest rates to quell the raising oil prices. Not only was the recession short but also the economy stabilized. So why don't we try it again? It's because the Federal Reserve really doesn't know what to do. They didn't then and they still don't. Our situation today only happens once in a blue moon, but when it does happen everyone ends up running around like a bunch of headless chickens.

Lets get the facts straight. The rising oil price not only hurts the consumers, but also the businesses. With every cent of inflation comes a cent less spent on our economy. Where does almost all of oil come from? Not the United States, but foreign countries.

While we make other countries wealthier, what eventually happens to us? Looks like we get the bad end of the stick in this situation.

Even though the numbers look bad, we're still in a good position to recover. The BEA (Bureau of Economic Analysis) has stated that our GDP is still rising, currently at growth rate of 4.5%, while historically our inflation is lower than ever. These are the numbers that we should worry about. While oil prices are high and hurting us in our money pockets, we're making it up and more so in other areas.

What about the worth of the American dollar in comparison to foreign monies? This is another problem that we must face soon. As our currency drops in trade value, commodity prices will only go up and vice versa.

All of our nations problems and issues are like a balancing...