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Author Topic: A Practical Assessment of Today's Economic Situation
Reshpeckobiggle
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Ok, so the stock market and housing market is tanking, unemployment will increase, and social programs will be cut.

However, the price of gasoline has fallen about 80 cents a gallon (where I live) and is expected to continue falling to below 3 dollars and stay thereabouts for the foreseeable future.

Let's round our gas savings out to 25%. I drive a rather fuel efficient car and probably drive slightly less than average. When gas was 4 bucks a gallon, I spent about 200 dollars a month on gas. That should drop to about 150 a month. That means a savings of 600 dollars a year. Obviously, someone who consumes more fuel will save more. Will the downturn in the economy cost me more than I'm saving?

My question is this: Will the average overall week to week savings of Americans outweigh whatever tangible cost of living increases and losses of income Americans experience?

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Lyrhawn
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The price will go back up in the Summer next year, especially if anything out of the ordinary happens, and the cost of heating nationwide will increase as we get into Winter. It's not a 12 month long savings, so you can't really average it out over the year like that.

The price of gas was going to drop heading into the Winter regardless of this economic thing. It was high for reasons other than speculation, like the Summer blend and the shutdown refineries. But those refineries are mostly back online with the rest scheduled to come back on soon, and the type of fuel was going to switch over to the Winter blend. The fuel type switch happens every year. The refinery shutdowns have happened frequently for the last couple years with the hurricanes. In other words? These aren't special savings that you're getting to offset the economic downturn; they're savings you've gotten pretty much every year in a cyclical change in the cost of fuel that takes place over the seasons.

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Reshpeckobiggle
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Yes, but the economy may right itself before the costs go back up. Heck, maybe the economy has righted itself and everyone was making bank on an artificially inflated market for the last two years.

I'm wondering if there is any degree of offsetting going on in the near-term, regardless of cycles. We could average 5 years and make a different argument, or 20 years and make yet another.

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Lyrhawn
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With regards to gas prices? I don't see how. With regards to other things? It seems to vast a category to consider unless you bring up specifics for discussion.
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Reshpeckobiggle
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But I'm specifically not asking about specifics. Will the economic downturn and all that entails be offset overall by the lower gas prices for the next six months to a year?

For average Americans, I should say. If one were to calculate the millions and even billions that some certain individuals have lost and will lose, I assume the answer is probably not. For the remaining 99% of us, are we actually going to have more money to spare each month? I know I will.

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Lyrhawn
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I'd still say no. Why? Because last year the same thing happened. Gas prices went down in the Winter and you had more money in December than you did in August because of gas prices. It's a type of savings that you get every year, which means that the added strain of the economic downturn still amounts to a net loss.

I think your question would only be valid if the economic problems CAUSED gas prices to be lower, in which case it'd be extra savings that might help mitigate the added costs as a result of those economic problems, which might result in a net neutral or net positive result.

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Reshpeckobiggle
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I hope to hear from someone else, since you are still missing the point of my question.
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Samprimary
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quote:
For the remaining 99% of us, are we actually going to have more money to spare each month? I know I will.
In both recessions and depressions, median income tends to drop and unemployment tends to rise.

When you look at the likely prospects, they are this:

- upper and upper middle class people lost plenty of cash from their portfolios.
- middle and working class people will have wages and perks reduced as sales slow down and budgets tighten.

The drop in income for most people greatly outweighs the limited savings that you see from the reduction in oil demand (which has had little to do with this burgeoning market crisis so far and was more the result of preexisting factors) and we haven't even seen yet what expenses will rise and consume more of a Joe American's GDP per capita.

Probably food and health coverage.

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Reshpeckobiggle
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I am inclined to agree. Maybe I just feel guilty because when I hear about all the economic woes, I can't help but think, "at least I'm doing ok; in fact, I have more money than I did before all this happened."

Also, I know that the global economic situation only has a limited impact on the price at the pump. I don't mean to imply a causal linkage.

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PSI Teleport
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quote:
I hope to hear from someone else, since you are still missing the point of my question.
It doesn't seem like he missed the point at all. You won't have more money to spend this year than you did last year. You have a savings on energy that you have every year regardless, so your yearly spending has not gone down, and is not offsetting anything. Even if the economy "rights itself" sooner rather than later, at most you will have broken even. Assuming you are looking at things from a yearly perspective. I mean, you could choose to look at it shorter term, but you'd have a skewed perception.

But I know what you mean about not having the economy directly negatively affect you like those with huge stock portfolios. I've wondered about that myself. I guess we'll see.

ETA: Consumer Reports shows that the average gas price one year ago was $2.77. Use that info how you will.

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