U.S. economy and mortgage rates

(David Beadle is a mortgage industry analyst. The opinions expressed here are those of the author. They should not be seen as representing the views of Reuters.)

NEW YORK (Reuters) - Why Gas Keeps Rising.

Gasoline prices have been rising at an increasingly rapid pace in advance of the summer driving season. This is occurring despite apparent efforts by American motorists to reduce their use of motor fuel through more careful trip planning and a switch in some cases to the use of public transportation.

Nevertheless, energy expenses continue marching relentlessly higher. If the trend continues, it could have adverse implications for the continuation of the availability of low fixed-mortgage rates.

It turns out the upward trend in price pressures is not only the result of rising global demand but also the result of a deliberate effort by our government to reduce the value of our currency to lessen the trade imbalance between the United States and other countries.

So far, this tactic has appeared to work. During the October through December period of last year, rising American exports largely offset the decline in domestic real estate activity, thereby keeping our broader economy above water.

But there were consequences. As the value of the U.S. dollar relative to other currencies continued to sink, imported goods prices began to rise. The most visible example was the cost of oil.

Oil prices are extremely sensitive to the value of our greenback because the global price of oil is quoted in U.S. dollars.

As recently as the end of 2002, one American dollar was equal to one European euro. But as America's federal budget deficit began to rapidly rise, Congress decided to borrow the required money which forced our U.S. Treasury Department to issue hundreds of billions of dollars in new IOUs. The result was a rise in inflation.