Quote:
Originally posted by RawAlex@Feb 27 2004, 11:42 AM
Anyone want to comment on this potential time bomb?
http://tonto.eia.doe.gov/oog/info/twip/twip.asp
fuel prices have a major effect on the end cost of all sorts of things. Is the US headed for inflation issues? Will gas be $2 this summer?
The dropping value of the US dollar does tend to prop up the internal economy by making it cheaper to make certain marginal products in the US instead of outside. Short term more people work. The effects on the shipping and transport industries are slower to show up.
Alex
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Fuel prices have had little effect on price inflation the past decade. Why would they now? The FED became strongly anti-inflation since the early 1980's and has taken all measures to keep it in check.
High fuel prices hurt the economy though. I've read some excellent analysis of that. An x% drop in GDP per 5 cents increase in gasoline prices. Pretty strong correlation though I don't have the numbers handy. It goes both ways though. If gas prices drop, it helps the economy. It's the change in fuel prices which matter. 7 and 4% growth happened
with historically high fuel prices. Who can predict future fuel prices?
I agree with JR's political analysis though I think the higher GDP figures are helping Bush a lot. Bush will never be able to convey this in the way that Ronald Reagan was though. A year or so before election Reagan had a 38% approval rating and then won in a landslide, largely because he was so good at conveying the strength of the economic recovery. Reagan was on TV convincing people of the recovery even before it started.
George Bush is no Ronald Reagan.