How's That Again?

"Tumbling price of oil helps stocks end day down," read the business headline on MSNBC.com on Tuesday, a warning repeated in another Associated Press story on Friday.

Gee that's funny. I used to think that falling oil prices were good for the economy. After all Americans buy (and increasingly import) a lot of gasoline so that rising prices are a real hardship for both consumers individually and for the larger economy. Don't I recall that less than a year ago economists and business commentators were wringing their hands about how soaring oil prices were threatening economic growth and posing challenges to presidential candidates?

And here's another seemingly upside-down concern. "Consumer credit outstanding continued to fall in May...which continues to drag on the economy," worried the Wall Street Journal on Thursday. Come again? Wasn't the fact that American consumers have been borrowing and spending their way into financial oblivion in recent years a major cause of the current economic collapse? Wasn't the unprecedented string of negative savings rates much deplored by financial experts? Didn't we want the U.S. public to stop spending beyond their means and start saving?

It's not that the stock traders and business analysts don't have grounds for these apparent 180- degree shifts in their preferences. Falling oil prices do indeed drive down energy company stocks, just as rising prices sent them soaring in recent years. Of broader consequence, if the price decline reflects falling industrial and consumer demand it may well signal continuing economic weakness.

And given that our economy has become so dependent on credit-financed consumption, any indication that consumers are finding it hard to borrow -- or even losing their taste for red ink -- clearly spells further trouble for already weak housing markets and shopping malls.

Well OK, but let us not lose sight of the longer-term -- I don't mean decades, the thought of which, I understand, glazes over the average American at the mere mention. But maybe till the end of the year at least. The fact is that if we as a nation, not to mention all the other countries that wisely or foolishly have cast their lot with our economic fortunes, are to get back on a sounder footing, we have to stop spending beyond our means. And we have to start making more of what we buy instead of depending on the short-term kindness of strangers to lend us the money, never mind the long-term ultimate cost. And maybe then the economic news won't seem so [anatomical expletive deleted]-backward.

Follow Jodie Allen on Twitter: www.twitter.com/pewresearch

Comments

[KillTheMessenger]

In the long term one either earns more than one spends or less. Some of us, like me, earn more. The others have a problem... that THEY need to solve.

:-)

[research]

Yes from a motivational point of view "The others have a problem... that THEY need to solve. " is correct. Each of us has an all encompassing obligation to look after our own welfare. It's up to YOU!

But this crash is the responsibility of the banksters and the politicians who enabled the banksters.

14 trillion to the the Banksters, 1 trillion to Main street, kinda.

the Derivatives market 10 times the dollar volume of actual stock or commodity.

With technology and automation, we can feed, cloth, house and provide health care for everyone on the planet, if we choose to. Even to the incompetent and contrary.

Instead we have let the Banksters suck up 93% of all the wealth on the planet. (12 trillion to 1)

We need Liberal democracy in the spirit of the Swedish middle way.

Or we will suffer under the corporate tyranny of the plutocracy.

Unfortunately, Obama Clinton Rahmm Lieberman and the leadership half of the democrats are corporatist DLC DINO's.

[research]

The plutocracy loves starving serf struggling just to survive.

The Plutocracy of bankers and multinational CEO's have bought and subverted our democracy.

The plutocrats have used their ownership of the Media to shape your attitudes, your beliefs, your mind.

So much so, that the facts weren't enough for you to see beyond the bully's mocking of Dean and Kucinich.

So much so, that you believe the governmnet is worse than business at running things, like health care, welfare, prisons, armies, police.

So much so that they bought half the democratic party, the corporatist DLC, Obama, Clinton Rahm lieberman half.

Till the people are truly "disillusioned" the plutocracy will rule.

My profile has facts and links for those who want to see.

Wake up!

I am beginning to see rooftop solar and biochar as more than the solution to our energy problems. They are a means to empower the individual.

[Indra]

You got that right!

[marinara]

The author is talking about two sides of the story. Consumer advocates warn about the huge consumer debt as credit card companies make billions in fees and billions in interest payments.

and (one year later) the think tanks whine that consumer debt is no longer the cash cow it was. I mean the think tanks funded by multinational corporations.

its a simple equation really. consumer advocates get a voice if and only if the corporate lobbyists don't need the media outlet to spread propaganda.

[marignymitch]

Macro-economically consumer spending is a good thing during a recession and saving is not.

Micro-economically consumer spending is a bad thing during a recession and saving is is not.

[medicontheedge]

the greedy pigs in the credit, banking and insurance cabals convinced us we could have it all, and we sold our soul to the company store to do it.

we should ALL just default on EVERYTHING, reset the whole dirty business, and start over.

[JPHR]

In the long term buying on credit only decreases the value of the goods actually bought because a disproportionate amount is siphoned off by that financial services industry "creating value" for its own account.

[DuganS1]

Good article.

[modwiz]

Too short a post. I wanted more.

[Jodie Allen - Huffpost Blogger]

Gosh, I thought nowadays everything was supposed to be no more than 140 characters long! but i appreciate your thought and will try to do better in the future.

[marinara]

twitter is for the texting crowd.

[grateful4thedead]

Nice article, Ms. Allen.

As to oil and equity market pricing, the oil companies weighing in the S&P 500 is over 5%, primarily due to the haircut taken by the other non oil companies.

As to debt, it is likely that we will not have a rebound for many years until the debt is either paid or defaulted. We simply cannot grow (responsibly) with the huge personal, corporate, and governmental debt overhang.

[Jodie Allen - Huffpost Blogger]

Many thanks. I fear you are right about the debt overhang. It almost makes me wish for a return of double-digit inflation, the debtor's salvation.

[WMcP]

What the [expletive deleted]? You mean we've got to stop living beyond our means? Surely that will sink the economy by Labor Day, never mind the end of the year. (Remember Lord Keynes. In the long run we are all dead.) I won't even go into the many signs and portents that the Apocalypse is drawing ever closer, but the fact is we may not even see the end of the year. My advice is spend, spend, spend and be grateful for the kindness of strangers.

[modwiz]

Spending may help the economy in the short run but it feeds the beast that feeds on us. Give to charities that do not have six-figure administrators until we get representation in D.C.. The lobbyists are stealing our government and have been for years.We are finally beginning to wake up.