Oil being traded in USD is beneficial for US economy, as every transaction will be in USD and floats back to New York Feds. However, this can also be an double edged sword in the above mentioned scenario.
The current fed cuts does boost exports. But its being overhyped by the media and the general public missed out the fact that it will only be a band aid solution. US had alternatives and better options, yet they chose the easy way out (which is to print money).
In world war 1 and world war 2. US abandoned the Gold reserve system and adopted the modern fractional banking system (system which allows you to print money from thin air). In fact, the warning signs are out, early in August last year when Fed Chairman Ben Bernanke pumped money into the economy. Where does the money come from? (thin air). Therefore we do have a short rally... but it was by no means sustainable. And in subsequent rate cuts, we are brainwashed to believe that every rate cut there will be rally (but the reverse is true)
A rate cut not only did not solve the problem, it also re-introduce the sub prime and mortgage problem back into the picture. It is important for investors to understant the risk trade off for rate cuts.
Not all rate cuts are bad... but you have to compare the estimate growth to estimate losses if Fed does cut the rates. The current situation looks bleak and gloomy for US economy. Not forgetting the current debts US owe to the international community crossed 9trillion (with 1/3 contributed by the Bush administration)
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