Tuesday, August 12, 2008

Less is more

The Wall Street Journal editorial page, aware that John McCain's proposal for war with Russia over Georgia is not really an option, but flailing around for an alternative --

There's one other way the U.S. could hit Russia where it hurts: by strengthening the dollar. The greenback's weakness has contributed greatly to the record oil prices that have in turn made Russia flush with petrodollars and fueled Mr. Putin's expansionist ambitions. Crude prices continued to fall yesterday, below $115 a barrel, and further deflating that bubble would do more to sober up an oil-drunk Kremlin than would any kind of economic sanctions.

Oil is priced in, er, dollars. So if the dollar is stronger, then each dollar buys more non-dollar stuff, which compensates for there being fewer of them per barrel of oil. Indeed it's pretty much this logic which explains the correlation between dollars and oil prices that the sages at the WSJ editorial page have noted.

It's all pretty basic stuff that one would think they know. But they are the people with Dick Cheney's ear.

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