Sunday, November 18, 2007

Why Oil Hasn't Hurt Us Yet

In middle school they gave you this token dabble in economics through social studies which consisted of a stock market game where you'd pick a stock, based on it's cool name and somehow thought that over the next three weeks there was some rhyme, reason or wisdom to be gained by this pointless exercise. And so this is how we introduce economics to our kids.

But another thing I did remember was two years later my sophomore year in high school where my economics teacher pointed out that every time there was a spike in oil there was an ensuing recession. Thrice this happened in the past 30 years of the chart he showed us, so I figured that was enough to cause a relationship. However since the latest oil embargo, our economy has yet to slip into recession when there's an economic shock in the price of oil. Matter of fact, the economy remains stubbornly resistant to recession in the face of not only the high price of oil, but a crushing credit crunch as well. But the reason is that we produce more GDP with a mere fraction of the oil we did back in the day, making the price of oil less effective on our economy;


Of course, don't count a recession out.

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