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October 17, 2008

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Gas prices are not independent of the economy. Infinitely lower gas prices is not necessarily a great thing.

House prices are STILL not affordable, at least not where I live (California). IMO we have a loooong way to go.

Anon --

Since when is $2 per gallon "infinitely lower"?

I agree $2 is not "infinitely lower", but I also agree that we don't need lower gas prices. We need high prices to encourage our society to wean themselves of this utter dependence on (mostly) foreign oil. We need to encourage investment in newer technologies that aren't so harmful to the Earth.

Also, the first commenter's point was that Oil, as a commodity, reflects the overall economy. Since commodities are dropping like a rock, this indicates a deflationary environment. This is not a good thing. The last deflationary environment was the Great Depression. Nearly every economist agrees that deflation is a very bad thing, since it's so difficult to get out of. The very rapidly dropping oil prices, along with dropping commodity prices as a whole, is just an indicator of this, and this is what the Fed is now primarily focused on trying to fix.

Re: #2 - what were they waiting for all these years? The American auto companies should have seen an oil crisis coming since the 70s or at least since the last Gulf War. I shudder to think what a mess a combined GM/Chrysler will make.

Is FMF not aware of what a hyperbole is?

Obviously $2 is not infintely lower, but it is 50% lower than what the prices were just 2 months ago. It is 33% lower than where gas prices are right now.

This would signal a lot worse things to come for us.

Rick hit the nail on the head.

Anom --

I don't know. Last time gas was $2, I was doing much better financially than I am now.

There are lots of other reasons prices could decline other than an economic meltdown, so I don't believe lower prices = bad times. That said, I do agree that we should work to reduce our dependence on foreign oil.

Last time gas prices were $2 was when they were on the way up.. ie catching up to what the true commodity price should have been.

If you do not know what I mean, there is a huge difference between nominal and real values, right?

http://inflationdata.com/inflation/images/charts/Oil/Inflation_adjusted_gasoline_price.jpg

Gas prices were artificially low and now everyone is surprised by the prices. Make em higher. Rase the cafe standards. Screw the gas guzzlers. If the gas guzzlers can prove business NEED (no you do not need an F350 for your accounting home business) then perhaps they can get a write off.

But FMF, care to elaborate why the gas prices would drastically drop down to $2/gal that does not signify economic turmoil or china imploding?

Also, FMF, correlation does not equal causation. Last time gas prices were $2 was in 2005... of course you were doing better financially.

I bet a lot of people could say last time gas prices were $1.40 they were doing a lot WORSE financially (dot com bust)...

So that is an irresponsible financial comment to make IMHO.

I actually like some things about recessions:

1. First and foremost, it forces people to focus on more important things (family, friends, faith, etc) than just money and more material possessions

2. There are less cars on the road as people take mass transit or bike or walk to save gas, and therefore less traffic and pollution

3. Less eating out = more home-cooked meals at the dinner table with the family = stronger family ties. That's actually good for society

4. Less junk mail in my mailbox (credit card offers and such tend to dry up)

5. As painful as getting laid off can be, it provides an opportunity for many talented workers to head in a new direction, gain a new skill, even start-up a new company (great time to do it with available labor cheaper, rent cheaper, suppliers willing to cut deals, etc)

6. Prices on everything from houses to cars to toys to meals out tend to go down, or at the very least, there are more sweet deals to be had

"We need high prices to encourage our society to wean themselves of this utter dependence on (mostly) foreign oil. We need to encourage investment in newer technologies that aren't so harmful to the Earth."

What a Crock.

Gas prices were artificially low and now everyone is surprised by the prices. Make em higher. Rase the cafe standards. Screw the gas guzzlers. If the gas guzzlers can prove business NEED (no you do not need an F350 for your accounting home business) then perhaps they can get a write off.

Another Crock of crap. Gotta love all of the class envy here.

@ Whatever ...

Class envy? Nah, I do quite fine for myself.

$0 in debt, good income, etc.

BUT how is that a crock? Gas prices were, as a fact, below the prices of previous decades in REAL dollars. Last year cafe standards were raised for the first time in 32 (THIRTY TWO!!!!) years! Gas prices are at a sustainable level, now.

And hey, I have no reason to complain, I still pay about $.10 cents/mile with my 30+ mpg car. Not my fault some idiots are paying $.35/cents mile with their 10-12 mpg cars. To clarify: they are not idiots for having the cars, just for complaining and acting like it is their right as an American to drive there F350 and fill it up for $20.

What ever happened to sustainability? Oh, it is not engrained in American culture. Throw away society.

4. Homes Are More Affordable


Depends on whether you are buying or renting!

Homes for sale are more affordable.

Homes for rent are less affordable.

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