Stimulus/Response OR Cause/Effect

Remember the bad old days in the summer of 2008 when the economy was in a nosedive and gas was $4 a gallon and Diesel fuel was $5 a gallon? Food prices were skyrocketing, primarily because of increased shipping costs, but also because of the encroachment of ethanol on corn supplies, which made corn more expensive and the cost of raising beef and pork skyrocket in tandem. Remember those happy days? Well, as the song goes, "Happy Days Are Here Again". Gasoline and diesel fuel are again on the rise, as is the cost of food, which in turn drags the cost of living upward along with it. Meanwhile, wages for most workers are stagnant, or even going down. The well-to-do, however, are seeing their earnings go up and are continuing to coast along in their comfortable lifestyles.

Currently, we are under the threat of a double-dip recession. The economic recovery that began last summer is losing steam at an alarming rate and we hear a deafening roar of political blame casting and finger pointing as to whose fault it is.

Blame it on the commodity speculators at the New York Mercantile Exchange (NYMEX).

Beginning back in the spring of 2007 the traders on Wall Street began bidding up the price of oil on a variety of pretexts; rebels in Nigeria blowing up a pipeline here and there, strife on the Gaza Strip, saber-rattling by Iran, etc., etc. None of this had anything to do with the oil supply, it was just used as an excuse to run up the price of oil. And people kept paying for oil at these inflated prices - kept driving their gas guzzlers at 90 MPH (usually with just one occupant per SUV). From the spring of 2007 onward, the price of gasoline rarely broke downward through the $3/gal. floor.

Then, as the summer of 2008 wore on and the price of gas broke the $4/gal. barrier, and as people started defaulting on their mortgages, the economy crashed and burned. Not just here in the United States, but globally as well. And, it must be pointed out, the mortgage meltdown was not completely independent of the oil bubble.

The runaway inflation caused by the oil bubble was a factor in many mortgage defaults, and as the defaults piled up, the housing equity in this country and abroad plummeted. People found themselves "under water" and in increasing numbers walked away from their mortgages, causing a further drop in housing prices.

Each ten cent increase in the price of gasoline translates to a $40 million deficit per day in consumer spending. That's $1.2 billion per month, $14.4 billion per year for each ten cent increase in the cost of gasoline. And that doesn't even include the inflated costs of food because of the high cost of shipping. In July 2008 alone, the cost of gasoline drained $24 billion out of the American economy. From the start of the oil bubble in the spring of 2007 until it burst in the fall of 2008, there was nearly a quarter of a trillion dollars wiped out of the American economy just from the inflated cost of gasoline alone. When one factors in the effect of the high cost of food, well, it amounts to trillions of dollars being robbed out of our economy.

In the fall of 2008 the price of gas came down to where it should have been all along - under $2 a gallon. But that in and of itself didn't solve the problem. The cost of food remained inflated, either because of greed by shippers or by food retailers, or both. They gouged the consumer with enormous windfall profits and continued to rob the greater economy. The cost of private transportation, however, gave the consumer some much-needed relief, and spending slowly started to make a comeback, however tepid. Talking heads proclaimed an end to The Great Recession, consumer confidence began to rise, and the stock market took off.

Well, all that optimism ran into a brick wall earlier this year when the recovery slowed to a glacial pace. And what's the common denominator here? The skyrocketing price of oil, and by extension gasoline, diesel fuel, and heating oil has thrown a bucket of cold water on the recovery before it even had a chance to take hold. Stockpiles are overflowing, there's no place to put it all,
supertankers are parked at sea acting as storage tanks, and yet the commodity speculators on Wall Street continue to run the price of oil up into the stratosphere in anticipation that at some point the economy will improve. But, of course, there will be little improvement so long as the cost of oil remains prohibitively high. And while the economy languishes and politicians strut and posture and blame each other, the rascals on Wall Street just keep on raking in the dough and laugh all the way to the bank.

There are things that can be done to fix this sordid state of affairs, but they won't be done. Political campaign coffers are filled by Big Oil, Wall Street tycoons, and other Special Interests who all want to keep the gravy train running, so the politicians will do nothing to upset the apple cart. After all, they DO NOT represent the people. Their real constituents are the wealthy individuals, businesses, investors, and fat cats who pay for all the attack ads, billboards, and junk mail flooding our mailboxes. The working people who struggle every day trying to eke out a subsistence living in an increasingly hostile economic environment are not being represented by their representatives. In an ideal world, this would cause some of these corrupt businesses, bankers, and politicians to be voted out and effect the election of real representatives of the people.