Maxed Out Mama: Its Oil Prices and a Delusional Fed

I loved this explanation of how hi oil prices filter through the economy.

From her article:

This is how it works. After a few months with significantly higher gas and diesel prices (higher product pricing), consumers start to get really strapped. The first six weeks or so most of them just pull back on weekly spending, but eventually, everyone but Sheryl Crow discovers that this week, they do need to stock back up on TP, paper towels, and tinfoil. So that wears out. Then they juggle the bills a little. Two-three months, and they are in deep, and they aren’t even walking in a lot of retail stores any more.

Between 2-3 months it shows in retail, so retail starts to push hard (coupons, mailed rebate certificates, that sort of thing). But it doesn’t work, so staffing and hours get cut a bit after another couple of months. Once the pattern is set for a few months, they adapt to it. That is why by May retail employment started to turn down.

Between 2-6 months it starts showing up in public service businesses. Lawyers, doctors, insurance agents, etc. They start pulling back hard, and they don’t make a lot of expenditures that they normally would (on average). All of a sudden all these businesses are cutting back.

So now all of a sudden the auto dealerships start hurting. Now once it has diffused to that point, things are going to get rocky fast.

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Read the whole thing

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Posted on June 13, 2011, in economical. Bookmark the permalink. Leave a comment.

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