Oil prices just one of many symptoms driving U.S. into recession
Over the past several months financial "experts" and politicians on all sides have been bickering about whether the U.S. economy is in a recession. Unfortunately for most people, the declaration of yes or no is a meaningless semantic argument. The way a recession is officially "defined" - two consecutive quarters of a shrinking gross domestic product - means that it can only be named after it has already happened. By that time, a lot of damage is already done to regular people. Unfortunately, prognosticating on the economy is a notoriously difficult prospect since all manner of hard-to-predict (and some not so hard) events can occur. There are natural disasters and manmade disasters like the whole mortgage debacle that is now unraveling. Last fall as the breadth and depth of stupidity of the financial markets that funded a completely insane real estate market was already readily apparent, economists were predicting that high oil prices would not trigger a recession. Of course that was based on a recession as defined by increasingly suspect official data. While oil prices at $100 per barrel in and of themselves might not cause a recession, the economies of developed countries are so dependent on that particular economy that the effect tends to be cascading. Combined with all the other factors such as skyrocketing foreclosures, plummeting real estate values and an increasingly costly and seemingly interminable war, $100+ oil is probably the tipping point.
[Source: CNN Money]
Reader Comments (Page 1 of 1)
Matt K 2:05PM (3/10/2008)
Prices are crazy right now. It's a treat to have orange juice in our house.. ORANGE JUICE.. W.T.H. ? Thank God my wife and I live less than 3 miles from our jobs.
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TX CHL Instructor 2:29PM (3/10/2008)
Oil prices are a symptom, not a cause.
How many folks actually think you can spend multiple TRILLIONS of $ to invade mideast countries without somehow actually paying for it? (Ok, not counting *neo-cons*, how many?)
Wars are really bad for republics (and generally fatal for actual democracies -- thankfully, the US is not a democracy -- yet). That includes "necessary" wars, BTW. The ways to pay these enormous sums of money are kinda limited:
1) You can substantially raise taxes (which has the negative effect of stifling the economy), or
2) you can substantially grow the economy (which neither of the major political parties has a clue how to do), or
3) you can inflate the currency (the 'hidden' tax, which has much the same effect as #1, except for the more animated finger-pointing contests).
Guess which path we are headed down right now?
If any of this is a surprising revelation, which rock have you been living under?
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MikeW 2:59PM (3/10/2008)
Hey, wars are good for some people. The central bankers.
See parts I-V,
http://www.youtube.com/watch?v=IiYXXVx7elc
The 'Nam part makes me real mad.
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Lou Grinzo 4:27PM (3/10/2008)
Excuse the shameless plug, but I wrote about exactly this set of converging issues this morning over on The Cost of Energy:
http://www.grinzo.com/energy/index.php/2008/03/10/the-road-from-here/
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scott in summit 8:35AM (3/11/2008)
So are we supposed to think that the economy only goes up, up, up? That there is no such thing as a business cycle? Where are we guaranteed that There Shalt Not Be Downcylces? These slowdowns leave the economy stronger in the long run, as they tend to staunch the stupid excesses that any economy gets into, ala mortgages, etc. during periods of long term growth. Americans (like me) can get lulled into feeling that recessions are these toxic, illogical happenings that someone surely must be to blame for. The media is largely to blame for fostering this type of expectation, as they sensationalize any story to jack up ratings/readership. We have lost all perspective.
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