$4

I don't think I need a more descriptive title - everyone knows exactly what I mean. But most don't understand its direct message(s).

1. Conserve: No, most people don't get this message. They are quick to lash out at some "greedy" corporation increasing the price at whim. And of course, somehow the Bush administration is to blame. And the media does its round of disinformation.
2. Weak Dollar: Oil is dollar denominated. So, a weak dollar demands more of them for the same gallon. I don't expect general population to understand the economics behind it, what's with the Fed!!!

Conserve: Let's see. This weekend, during the "heat wave" in the north east, I drove to a local Best Buy. In an otherwise empty parking lot, I could find parking upfront. I parked next to a fairly late model Jeep (large) - noticed that the engine was running but no driver. I noticed couple of passengers inside. They must be enjoying music and the air conditioning. I went in, browsed for half-an-hour or so. When I drove off, that Jeep was still running - parked. What a colossal waste? If it is just air conditioning, store was very comfortable. And it wasn't crowded either. Aren't there better ways of generating electricity for that air conditioning than running a Jeep 4x4 (6 or 8 cylinder engine) idling in a parking lot? And I am sure this indigent driver would be happy to mouth off into a microphone if a reporter were to approach him/her about the price of gas - blaming some "invisible" corporation. Why are we so stupid?

And my favorite pet peeve - speeding. Especially, speed up to catch up with the car in front of you. Most modern cars come equipped with Gas Milage display. And it is pretty obvious that you get the most milage when you are driving steady. And yet people are constantly revving up to catch the next car ahead and put the breaks on to slow down. Each time burning more gas than the engine needs to keep the same pace. Most internal combustion engines (what every car has) operate optimally around 60-70 mph. Even if you don't drive a hybrid (I don't), by driving steadily on a highway, you can still get a respectable milage. I get 30 mpg on most days - driving about 60 miles round trip. I am often amazed how few people use cruise control.

Weak Dollar: What's with the Fed? Weak dollar has a huge following domestically - for all the wrong reasons. Its politically very popular. With a weak dollar, our exports are cheaper and hence more in demand overseas. So congressmen pressure both the Fed and the administration - both of which accommodate those popular items. The flip side of this is that all our imports, including oil is more expensive. And as American's are by far the largest consumers in the world, we are net importers of foreign goods. All of which is more expensive due to a weak dollar. Administration thinks that its public statements about "strong dollar" policy is enough to fool currency markets, which are closely monitoring administration's deeds.

And the Fed's easy money spigot. Is there any adult supervision going on over there? And everyone is defending the indefensible - the link between easy money and the weak dollar. All you need is common sense. But these guys are economists for crying out loud.

$4 gas is better than $10 that the Europeans pay. And our commodity markets do work. And prices do come down eventually. Not quite so in many other parts of the world.

Maestro: Not so sure

He had been the darling of the media - for much of the 90s and even recently. He is known as the Maestro - for his skillful handling of the US Monetary policy. He is the venerable Alan Greenspan.

I think he is a brilliant economist of all times. And a top notch Fed chairman too. And he is most well known for his 'irrational exuberance' comment. He was dead on. Except, the market did not tank after that comment. So, he too was more guarded later on. No one, apparently, even the Fed chairman wants to second guess the wild beast - aka, the Market.

My point is not to take any credit away from him. But to dispel the mystique about him.

Wall Street Journal always pointed out that the Fed uses trailing indicators and is always using its monetary policy in a reactive mode. It had warned repeatedly in and after 2003 that the Fed easy money policy will lead to huge problems in the future. And their analysis was simple. They were looking at forward looking indicators - dollar and gold.

Fed, although independent, is not immune to political pressure. And this is essentially what has led to this sorry state of affairs right now. And the media circus too. He reveled in that.

Poor Bernake had to inherit this mess. And also to live up to this out sized void of Greenspan. Not an easy task.

He was right in wanting to include Food & Energy back in the Core Inflation indicator. Any one but an economist can think of a 'Core Inflation' indicator without Food & Energy. Isn't that what people use and measure their well being based on that?

However, Bernake would not be able - at least at this time, to modify core inflation indicator. Political pressure is too great. It also happens to be an election year.

So, in conclusion, Greenspan deserves some weighted blame for the current mess in our markets. Maestro - not quite.