Tuesday, August 05, 2008

The Sky is Falling, Again

Oil prices are dropping... which means bad news, apparently...

Oil prices are falling sharply, and that's good news. But not nearly as good as you might think.

No doubt the drop, down to $120 by mid-day Monday, gives strapped consumers relief at the gas pump. Prices have dropped below $4 a gallon and could be headed toward $3.50, going by trading in wholesale futures markets. Any decline will be welcomed by Americans struggling under the burden of falling house prices, rising layoffs and stagnant wages.

But falling oil prices also suggest that the recession the U.S. has so far avoided is well on its way, as consumers pull back from the spending spree that drove economic growth earlier this decade. A weakening economy will mean more layoffs, further pressuring already reduced spending.

"There is no doubt that with gasoline prices dipping below $3.90 a gallon we have a bit of a reprieve on the energy front," Merrill Lynch economist David Rosenberg wrote in a report Monday, "but the reality is that this is a chicken and egg game because the decline is reflecting the consumer recession."
So we've avoided the recession, but the recession is now coming, which is proven by the lower gas prices at the pump. If the gas prices were higher, I guess that would be a good thing, because we wouldn't be in a recession. I'm sure the media would report it that way, too.

The rest of the article continues to inform us that prices are dropping because of lower demand. Who says the media doesn't understand basic economics?


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