Monday, June 16, 2008

Concerning Fuel Prices and Recessions

Michelle and I took a short but beautiful vacation last month. We drove up the state to Yosemite and Healdsburg in Sonoma County. In between waterfall gazing and wine tasting, we were in the car. The trip put over 1,200 miles on my car which means, we consumed approximately 55 gallons of gasoline. At a then average of $4.10 per gallon, the trip cost us approximately $225 in fuel alone.

Now I'm telling this because as we all know, the recent sharp increases in the price of gasoline affect us all. Nobody is happy about it. The economic impact it has on us is real and we are reminded of it every time we go by a gas station. We cringe as we sneak a peak at how high the price has gone up since we last looked. We look down at the fuel gauge and hope that the needle is still on the F half.

Then we hear about house foreclosures, food shortages, and massive layoffs in the auto industry. Indeed, the economic news has been virtually 100% negative in the past few months. It's no surprise then, that polls show that most Americans believe we are in a recession.

But here's the rub; A recession is explicitly defined as two consecutive quarters of negative economic growth. Well, as it turns out, the GDP (that's gross domestic product) of 4'th quarter 2007 and 1'st quarter 2008 were positive, that's right, positive. Yes, they were the lowest in six years but when you think about recession, you have to realize it's about negative economic growth for two consecutive quarters. We don't have negative growth for even one!

Why is the news so negative?

Well, it just happens to be an election year. Our friends of the main stream media are up to their usual tricks. They repeatedly pound in our heads that the economy is sagging. On top of that, they tell us that the Presidential election is focused on the economy. No wonder since that's all that seems to be reported now a days.

When was the last recession?

Look it up and you'll find the last recession (or two consecutive quarters of negative GDP) was in 2000 to mid-2001 during the Clinton administration and the beginning of the Bush administration. Remember all the negative news about the economy then? No, I don't either.

2 comments:

  1. Tell this to the families who have a choice between food and gas. Everyone is hurting right now. I can't do things like go out to see you. Vacations are done cause I can't afford them. You might not care cause you believe everything is fine out there (just as in denial as your hero Bush) but we are hurting. I haven't even filled up my gas tank since it would take a big hunk of my check. Sorry you don't live in reality like me!

    ReplyDelete
  2. "Now I'm telling this because as we all know, the recent sharp increases in the price of gasoline affect us all. Nobody is happy about it. The economic impact it has on us is real and we are reminded of it every time we go by a gas station. We cringe as we sneak a peak at how high the price has gone up since we last looked. We look down at the fuel gauge and hope that the needle is still on the F half."

    I guess you didn't read that part of my post. Shame on you for again, saying I'm in line with Bush and saying I don't care.

    ReplyDelete