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August 12, 2011
The Catch-22 Recovery: We Need to Keep Gas Prices Low
Why Gas Prices Matter So Much This Time
Why doesn't this happen in other recessions?
Um, well, maybe because gasoline isn't generally near an all time high price when unemployment is over 9%? Just a hunch.
And what caused gasoline to be so expensive? I suspect it might have something to do with our $10 trillion cumulative trade deficit (adjusted for inflation) combined with our negative real interest rate policies. Once again, just a hunch.
That leaves gas prices. The U.S. may want to consider creating a price ceiling for average gasoline prices, perhaps at around $3.50. In order to ensure that consumers don't have to pay more than that for gasoline, one step could be to relax taxes when prices begin climbing past that mark. When taxes can't be lowered any farther, perhaps subsidies can help cut prices.
Yes! Let's try that 1970s thing again! Woohoo!
1973 oil crisis
Government price controls further exacerbated the crisis in the United States,[24] which limited the price of "old oil" (that already discovered) while allowing newly discovered oil to be sold at a higher price, resulting in a withdrawal of old oil from the market and the creation of artificial scarcity. The rule also discouraged alternative energies or more efficient fuels or technologies from being developed.[24] The rule had been intended to promote oil exploration.[27] This scarcity was dealt with by rationing of gasoline (which occurred in many countries), with motorists facing long lines at gas stations beginning in summer 1972 and increasing by summer 1973.
There is some good news though.
Secondary effects
Various secondary effects occurred, notably toilet paper panics in Japan and the United States; these were unfounded panics which became self-fulfilling prophesies, and are classic examples of the Thomas theorem. Price rises and unfounded rumors of a toilet paper shortage – based on oil being used in paper manufacturing – caused a panic and hoarding of toilet paper in late October and early November in Osaka and Kobe, among other cities.[35][36] In the US, Johnny Carson inadvertently caused a three-week panic when, on December 19, 1973, he read a news item regarding the US government falling behind on bids for toilet paper and quipping that the nation faced a toilet paper shortage on the Tonight Show.
I'm fully prepared, lol. Sigh.
In all seriousness, I only hoarded toilet paper because I felt it would perform better as an investment than most safe alternatives in this negative real yield environment. Ben Bernanke tried to force me to buy risk assets. I opted to buy something else. I'm not exactly sure how it helps our economy long-term though.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
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At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
16 hours ago
7 comments:
"Various secondary effects occurred, notably toilet paper panics in Japan and the United States"
I don't know who came up with this saying originally, but "he who panics first, panics best" surely applies in this case!
Watchtower,
I'm a believer in pre-panicking theories. I had a large rice supply heading into the following and have since boosted my reserves.
2008 global rice shortage
While no one single cause is blamed, the dependency of rice supply on oil prices and six years of drought in Australia's rice-growing regions appears to have tipped the scales toward a worrisome reduction in global rice supplies, and the commensurate rise in global prices.
Better to panic one year too early than one day too pate. It has always worked for me. Unfortunately, sometimes my trades are also very early and that has not always worked for me. :)
From the article, "the U.S. must do something to deal with the problem that rising gas prices pose for future economic expansion."
Invent a new, hyper-efficient, cheap, energy source, duh!
Doh! "too pate" = "too late".
Invent a new, hyper-efficient, cheap, energy source, duh!
No! Every country needs to set the gasoline price at a nickel per gallon. We'll be hyper-efficient at burning it instead! Woohoo!
And while we are at it let's fix the price of liver. Why? Better pâté than never! ;)
I remember our Great Bog Roll Crisis - I hadn't known it was international. We also had a self-fulfilling sugar crisis. A grocer chided me when I bought a few bags of sugar: "What do you want those for?" "Wine-making." "That's disgraceful; you should leave them for peole who want sugar in their tea." "Nah, let 'em us saccharin."
dearieme,
I'm trying to picture being chided for buying extra goods from a store.
As an American, this concept is foreign to me! ;)
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