As gasoline prices spike, consumer durable spending decreases. And vice versa. The widely recognized soft spot in 2011Q1 is seen here as a run up in gas prices and a decrease in consumer durable spending. We seem to be seeing a similar pattern this year, though consumer durable spending appears already to be recovering. If I have any short term hope for this economy, this graph is its parents. If gasoline prices continue decreasing, PCEDG will increase and help the economy grow. And vice versa.
The mechanism operates because gasoline expenditures are very price inelastic in the short run, and consumers are budget constrained. More spending on gasoline, less on durables, and most of those are manufactured in the US, so it depresses economic performance. This is a very demand-oriented story.Read it at Naked Keynesianism
The nagging influence of energy prices
by Steve Bannister
5 comments:
Tom,
Paul Mason interview with Steve Keen broadcast last night on BBC Radio 4. Some fantastic points made.
Link:
http://www.bbc.co.uk/programmes/b01j5h51
The inflation monster is eating developing nations alive, period.
Developed nations won't be able to achieve 'growth' in a significant way because of it too. So even when the financial problems are stabilized/fixed inflation will be a tax on growth.
As baby boomers pass out situation will get a bit better, but there is a long way to that.
So let's hope technology saves the day again, because nothing else will and Malthus is tough, ask poor people in developing nations.
Have you guys read Morgan W.'s JG?
Not a bad start for the MM guys.
http://pegobry.tumblr.com/post/21427545322/morgan-warstler-via-steve-randy-waldman
Winslow R.
Thanks, y. Promoted it to a post.
Anonymous, here is the kicker
"Meanwhile the value of a person’s labor can never be defined by fiat. Our workers are being competed with by global forces. They aren’t worth what you want to pretend. Stop pretending and let the market clear."
Race to the bottom.
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