Understanding the PetroDollar

The thought about high oil prices and inflation does not jibe with Milton Friedman's theories about money. That is, it doesn't until you consider the petrodollar. Then it starts to make more sense.

That means the current high prices for oil won't cause inflation. It will cause the reverse. Less money means high "interest" rates. The price of oil works like interest rates. If interest rates are high, economic output drops. That means recession.

The statistics show a higher rate of inflation, but not all of the stats showed that. If you count "core" inflation, the prices didn't go up. That means aside from oil prices, the inflation rate did not go up. Eventually, the rest of the price structure will fall even while oil prices stay relatively high.

That would be true if oil is acting like a currency. Check back later to see if that is true.