[rowante]

US-Economy
$this->bbcode_second_pass_quote('', 'W')ASHINGTON (AP) - The U.S. economy clocked in at a robust 3.4 per cent annual growth rate in the second quarter, fresh evidence the country's business climate is sunny despite surging energy costs.

The solid increase in the gross domestic product for the April-to-June quarter, reported by the Commerce Department on Friday, came on the heels of a larger 3.8 per cent growth rate in the opening quarter of this year.

[pup55]

I'll field this one.

First, you have to subtract the 1.1% population growth in the last year.
That brings us down to 2.3%.

household debt

National Debt

The charts in these two links say the increase in consumer debt and national debt in the last year was about $375 billion. The economy is about $12 trillion, that's about 3%.

So, actual "growth" was probably slightly negative. All of that extra money that families plus the US government borrowed got spent somewhere. Had this not happened, we would be in a recession.

Unfortunately, this cannot continue indefinitely. Until the economy "grows" more than the population increase plus the debt increase, we are just borrowing from the future.

[Egon_1]

You should realize by now that most statistics are manipulated for one reason or another.

Is it so hard to believe that economic statistics would be manipulated to show that everything is fine? Or better yet, that everything is actually improving even though most people know damb well that things are NOT getting better.

How the hell is inflation "tame" when:
- oil prices have tripled in just a few years
- Housing prices have gone sky high
- Health care cost have exploded
- Raw material prices have soared
- etc.
- etc.

Look around you. Ignore the media and look around you. What do you see happening around you? Are your costs of living increasing? Are you wages increasing to match?

"Are you better off now than you were 4 years ago?"

[FoxV]

also keep in mind that just because the cashier gets a call 3 times a day to raise the price at the gas station (despite the gas being paid for a week ago) doesn't mean the effects of oil prices are immediate.

it'll take a while before the costs of oil is passed along into things like food, packaging, clothing, etc...

There are also other things like Municipal taxes will probably go up significantly next year to cover rising energy and road repair costs.

[AmericanEmpire]

People at work complain about the cost of living increase and the fact that wages don't increase. Or more likely the case is they lost their previous job and the new wages are actually lower.

I certainly notice that my money doesn't go as far these days. I can't wait until their is a currency collapse and we have hyperinflation.

[MagnoliaFan]

$this->bbcode_second_pass_quote('Egon_1', '
')How the hell is inflation "tame" when:
- oil prices have tripled in just a few years
- Housing prices have gone sky high
- Health care cost have exploded
- Raw material prices have soared
- etc.
- etc.

Look around you. Ignore the media and look around you. What do you see happening around you? Are your costs of living increasing? Are you wages increasing to match?

[AmericanEmpire]

$this->bbcode_second_pass_quote('', 'w')e are exporting capitalism to China

[Kylon]

Good for corporations bad for people.

Good for producers(because they can more easily sell their goods), but for consumers(because they can't buy goods as easily).

[Shiraz]

Rowante, you may remember that the Venezuelan economist Andrew McKillop from vheadline.com has been enunciating a theory about oil prices and economic growth for many years, whereby high prices will not slow growth (not initially anyway).

Here's the first example I could find, and it was published on 23 Sept 2004, about a year ago, when oil prices were still under $50.

$this->bbcode_second_pass_quote('', 'C')onclusions:
Increasing oil and gas prices, up to levels around $75/bbl or barrel-equivalent ($10-13/million BTU) will certainly be called ‘extreme’, but will not in fact choke off world energy demand.

The likely net impact of price rises to $75/bbl, if interest rates in the OECD countries are not ‘vigorously’ increased to double-digit base rates, will be increased world oil demand due to continued and strong economic growth. This ‘perverse’ impact of higher prices will therefore tend to reduce the time available for negotiating and planning energy and economic transition.

Only at genuinely ‘extreme’ oil prices, well above US$100-per-barrel, will the pro-growth impact of increasing real resource prices be aborted by inflationary and recessionary impacts on the world economy.

[MonteQuest]

$this->bbcode_second_pass_quote('rowante', 'H')igh oil prices seems to causing record market gains in economies around the world. High prices of resources in general are a major boon to the Australian economy.

This seems to be counter what most people expected... anybody got some ideas on what is happening?

[jaws]

Oil is a higher order good, meaning it is used for the production of lower order goods, those being used for the production of first order goods to be bought by consumers. This means oil is used to produce fertilizer which is used to produce wheat which is used to produce flour which is used to produce pizza. Pizza is the first-order good, oil the the fifth order good.

When the price of oil goes up, investors immediately value oil companies at a higher price because they expect higher profits. They should also value other companies at a lower price because higher oil costs eats away at their profits. That is not what happens, because there is a delay between oil prices going up and the change in profitability propagating through the chain. So while the price of oil is up and oil companies are estimated to be more profitable, the price of pizza hasn't changed and pizza companies are still estimated at the same level of profitability they were before the increase in oil prices since the costs haven't yet filtered to the end of the supply chain. This is how rising oil prices are causing market rallies everywhere. Investors are correct about the future earnings of oil companies, but incorrect about the future earnings of every other company.

As companies calculate their earnings taking into account ever-increasing prices, the stock values of non-oil companies will fall. In the short-run however it is possible for both to be very high. This is what happens in the first part of a wave of inflation.

[DantesPeak]

In addition to what jaws said, energy prices for homes and businesses are stabilized by local public utility commissions. Utility companies realize the increased costs, and essentially bank them, passing them on later and slowly to power consumers. While many states allow the direct transfer of some seasonal prices increases, most of the costs are passed through only after review by the utility commission.

In the transportation and other industries that are heavy consumers of energy, there is a general disbelief at first that price changes are permenent - so cost increases are not passed through quickly to the final consumer.

With statements from public officials, the Fed, and big media, that the economic is resilient to energy price changes, optimism develops and feeds into the reluctence to pass along cost increases. This kind of optimism also supports the positive views of stocks on non-oil companies.

[Russian_Cowboy]

There is another reason why the runup in the oil prices is self-sustained. It is because of the abnormally high and increasing investments in real estate. Houses take an awful lot of oil and other commodities to build. On the other hand, the runup in the commodity prices does not reduce the incomes of the welloffs who buy McMansions. It may actually increase their wealth because those welloffs may own oil companies or be able to pass the increase in commodity prices on to the poor sweatshop workers in other countries and take advantage of the decreasing cost of construction labor in their home countries. Check out the McMansions (and the price tags) being built in Russia by the poor immigrants from the other former Soviet republics of Ukraine, Moldova, and Tajikistan:

http://www.cottage.ru/objects/cottage/29761.html
http://www.cottage.ru/objects/cottage/29363.html
http://www.cottage.ru/objects/cottage/30691.html

Amasingly, it is the increase in the commodity prices that made these people sell their labor to Russian oil barons almost for free and thus increase the rate of oil (gas, copper, etc) consumption.

[shakespear1]

Wow, it almost looks like Disney is building homes in Russia

[Russian_Cowboy]

$this->bbcode_second_pass_quote('shakespear1', 'W')ow, it almost looks like Disney is building homes in Russia

[oilluber]

$this->bbcode_second_pass_quote('Egon_1', 'Y')ou should realize by now that most statistics are manipulated for one reason or another.

Is it so hard to believe that economic statistics would be manipulated to show that everything is fine? Or better yet, that everything is actually improving even though most people know damb well that things are NOT getting better.

How the hell is inflation "tame" when:
- oil prices have tripled in just a few years
- Housing prices have gone sky high
- Health care cost have exploded
- Raw material prices have soared
- etc.
- etc.

Look around you. Ignore the media and look around you. What do you see happening around you? Are your costs of living increasing? Are you wages increasing to match?

"Are you better off now than you were 4 years ago?"

[Lehyina]

So far the year-to-date average oil price (WTI) is around $54/bbl. I think it will take prices at least 50% higher than this (i.e. annual average of WTI price of around US$80/bbl) before growth gets hit and the economic fall-out is severe and obvious. See Cost of USA Net Oil Imports and Economic Impact