Idol Chatter

In a recent news article I read today on Reuters.com, the focus was on how we may go into a depression from the current recession.  Now the premise of this argument was that the recent and significant fall of oil prices is a bad thing.

Are you kidding me?

A much needed easing of one of the principle expenditures in any individual’s budget is now a bad thing.  Forget how the sky high prices were making us all cut back our driving and cut back on other discretionary expenditures, that supposedly is not as bad as getting this price break on gas.

The arguement is that “the swift fall in oil prices is now lowering the absolute level of consumer prices and bringing with it likely declines in nominal GDP over the next three quarters.”

Well isn’t that only a potential rollback of the steep incline we just saw during the first 3 quarters of this year?  Moreover I say ‘potential’ because many companies absorbed the price increases for a period of time before they started to raise their prices.  To say that they now will decrease prices is a bit of a stretch.

Of course if you bought the first arguement you could then buy the second which is that “Falling prices would cut demand and discourage employers from hiring.”  But really if prices came down significantly that would incent consumers to, well, consume again.  And there is a core demand in the economy that won’t be easily shut down.

With government bail outs for the financial industry and probable for the auto industry, two hard hit sectors are getting some relief.  And with Obama’s likely proposals to spend on infrastructure and maybe a tax cut, the economy won’t pull out of the recession anytime soon but sure won’t sink into a depression.