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The great engine of the American economy is the so called consumers, you, me and everyone spending the money we make. The lower energy prices are going to have a great impact on returning the American economy to full bloom if they stay around for a year or more. The reason is not only the 260 billion dollars (at current prices) being allowed to stay with ordinary citizens, but the multiplier affect of the money. When I spend a dollar, it goes to someone else who buys things with it and the person who gets that second purchase also buys things. Round and round it goes (this is why recessions come on: people stop buying or suddenly can’t afford to buy and the negativity multiplies throughout the economy and things go downward quickly.)
There aren’t, as far as I know, any good economic projections for how important the current price dive might be, but you don’t need to be an economist to see they could be really meaningful as the money staying in people’s hands spreads throughout the economy. During recessions, people drive much less, which also means they are spending less overall because they aren’t going where they used to go to buy things, do things, enjoy themselves. Now, that pattern should be reversed. People get to do more, spend more, you know, be Americans.
The quickest sign of “good times” on gas prices has been the resurgence of sales of SUVs. Chrysler reported sales up by over 30% during November over last year’s sales for the month. Of course, this isn’t necessarily a good thing, but, hey, for the economy, it is. Economics doesn’t know the difference between a good purchase or a bad one. When money flows, economically that’s good for almost everyone. (If you want to be driving that big, gas guzzler three or four years from now when prices might be much higher, that’s your problem, dude, not mine.)
This is BAD NEWS FOR REPUBLICANS because their whole pitch to the voters is that things are terrible, Obama is an horrid leader, he’s responsible for, in fact, just about everything bad in the world accept the drought in the southwest (some would suggest he had a role in that, too, if they could come up with a way to pin it on him). If full prosperity returns and continues into the 2016 election season, the Republicans could wind up struggling to sell their story of bad news, bad times and the need for change. They should, in fact, be thinking right now about how they would deal with the return of prosperity, but they are, in the main, drunk with happiness about their control of both houses of Congress, so the future isn’t a big focus at the moment.
Doug Terry, 12.5.14
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