I feel so old old old! This issue played out when gas first went over 99 cents a gallon -- stations charged either by the liter (but we were all too dumb to understand that!) or by the half gallon. Eventually, pumps were modernized, but I guess they could have been a bit more forward-thinking!

For years, Americans luxuriated in low inflation adjusted oil prices and bragged about how economically nimble we were in comparison to the laconic Europeans. Well, now the tables are turned.

With or without a gas tax holiday (that none of its proponents ever claimed would provide more than temporary relief), high energy prices are here to stay. The Europeans are prepared. Their cars are smaller, more of them live in urban, more densely populated communities and their homes, on average are smaller. And of course, their enormous head start over the United States is augmented by their serious, if imperfect attempts to comply with the Kyoto Protocols. Just as the United States was perfectly positioned to take advantage of the computer/internet revolution that began in the 1990s, the Europeans have a tremendous advantage over the Americans in adjusting to a world of high energy prices.

This tremendous competitive advantage will be accentuated still further when the United States moves in the direction of universal health care. Of course, the Europeans made this transition years ago and the economic dislocations associated with it are a distant memory for them. While adopting universal health care in the United States is a must for both ethical and long term economic vitality, make no mistake that the short term consequences of modifying one of the largest sectors of the American economy will not be insubstantial. The government may very well prove to be less adept than the private sector at controlling health care costs even given the likely reduction in administrative (and marketing) expenses. Over the short and intermediate term, health care expenses are likely to grow as a percentage of GDP faster in the US than in Europe.

The inevitable consequence of all this, is that the Europeans will be getting comparatively wealthier and the Americans will be getting comparatively poorer. But don't think this means that American military might will be shrinking. It just means that Europeans will be paying for more of it. During the cold war and in its aftermath, the Europeans were quite happy to use the American military as mercenaries to protect them from the Soviets. In the years to come, the Europeans will be happy to pay a little bit more for the Americans to serve as mercenaries to protect them from militant Islam. After all, militant Islam is a far bigger threat to EU nations than it is to the United States.

So what can Americans do about all of this? Not much, I'm afraid. The Euro has been rising steadily against the dollar for almost three years. Interest rates, that have been persistently higher in Europe than the United States, can explain some but not all of the weakness of the dollar. If you need any confirmation of this, just look at the price of gold in either Euros or dollars.

The one thing that Americans with access to the stock market (exchange traded funds) can do is sell dollars and buy Euros. That's about the only thing likely to provide any relief.

It looks a lot like “old” Europe will have the last laugh after all.

Pay him in monopoly money. Tell him that will be worth more than dollars some time in the near future.