Monday, March 24, 2014

Driving ZIRP Home

Click to enlarge.

The black line (left scale) shows the fed funds rate.

The blue line (right scale) shows the 12-month moving total of vehicle miles traveled.

Maybe we'll make it through the ceiling (seen in purple) this time. Maybe we won't. In any event, it is a long climb back to 2007.

Correlation does not prove causation, and that is certainly not what I'm trying to do here. I just find it interesting. That's all. Further, I think it is open for debate on which way the actual causation would be.

Has ZIRP caused oil prices to rise and therefore vehicle miles to stagnate? Or have struggling vehicle miles been a sign of a struggling economy and hence the Fed's desire to continue ZIRP? Or perhaps both working in combination?

For what it is worth, even if vehicle miles traveled do rise to 2007 levels at some point in the not too distant future, I would not expect to see the fed funds rate necessarily follow suit. This chart does not extrapolate backwards in time all that well. Over the long-term (until recently), vehicle miles traveled have been growing exponentially. The same cannot be said of the fed funds rate (which has generally been in decline for 30+ years).

Source Data:
St. Louis Fed: Custom Chart


Troy said...

$4 gas is something of a wall apparently.

RVs were supposed to be the big thing for boomers to buy in bulk, but boomer remember filling up for a $5 so the $100+ it costs to fill up an RV can be tough.

Stagflationary Mark said...


We thought about getting something like this just over a decade ago, but that was before I started an illusion of prosperity blog. Sigh.

Mr Slippery said...

How is this for a timely cross post?

US Gasoline Retail Sales Since the Financial Crisis

Stagflationary Mark said...

Mr Slippery,

From your link:

Another glorious victory for The Recovery™.

Hahaha! Sigh.

Jazzbumpa said...
This comment has been removed by the author.
Jazzbumpa said...

I'm doing my part.

Made a 2000 mile car trip in the last week.

And I'm fucking exhausted.

[no pun intended]


Troy said...

blue is gas retail sales

red is driving population (right axis)

sales numbers are weird since per-household gasoline is $3000

an order of magnitude bigger than $50B in the aggregate.

Still, 4% of income to move around this wonderful planet is not too big a burden, compared to the 15% it costs to remain in place!

(it's my thesis that if gas rises to 10% of gross incomes, housing "has" to fall concomitantly)

Troy said...

oh, wait, lemme guess, 'retail trade' means junk food bought from gas stations.

:head desk:

Troy said...

and, yeah, if gas doubles, junk food sales from gas stations is going to disappear before rents fall.

the majors are already having this problem, gas costs sucking money out of consumers' pockets.

friend of the family had their own Kwik-E-Stop in rural Minnesota. Good location, but gas going from $1 to $3 BK'd them pretty quick.

Troy said...

1980-1999 households spent ~$20/week on gas.

it was an innocent time, until we gave China our moneyz and they starting buying and burning "our" oil with it.

Stagflationary Mark said...


Wow! You were like 52 of me! Takes me a full year to drive 2000 miles! No joke.

Stagflationary Mark said...


friend of the family had their own Kwik-E-Stop in rural Minnesota. Good location, but gas going from $1 to $3 BK'd them pretty quick.