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Wish-I-Were-Fishn

Did the high gas prices ruin the economy

107 posts in this topic

Let's hear some opinions about this: Did the high gas prices ruin the economy?

I say that it was the biggest single factor that broke the camel's back. Yes, there was (is) the housing issue, but the high gas prices effected us all.

Pres. Obama talked about Elkhart IN and the jobs lost, but it was the high price of gas that basically shut down the RV (and boat business) IMO.

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Economy Ruined in phases.....

1. Americans borrowing over there heads.......

we brought this on with over borrowing and not knowing our own future. What ever happened to the 20% down rule in borrowing???

No, gas isn't the reason. Its Americans wanting to finance the American dream.

Oh and just so you know... I'm just as guilty as the next for over borrowing so I'm to blame as well..

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think about everything it effects....your food,clothes etc. the price of just about everything is effected by shipping costs. the owner of the local bar admitted that the price of a pitcher goes up with delivery fuel sur-charges. things havent been the same since the 4$ to 5$ per gallon prices and if (or when)the bird hits the fan in Iran it will be even more per gallon and than what are we going to do??

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IMO, there's too many factors involved with the current economic situation to point the finger at just one. The oil industry was definitely part of it.

Our current situation has been a long time coming.

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I think it played a part.

It may not have been the main cause, but it helped.

There were a lot of people who were right on the edge and when gas prices hit. They went over, upside down. As someone who has been there once you are behind, you are screwed.

From what I hear, it takes about seven years to get yourself out.

When things go south, they go south fast. Over extended mortgages, cost of goods, cost of fuel.

It was Clinton who masterminded the Sub-Prime Mortgages. Should we blame him?

Fingers can be pointed in many directions. If is anyones guess how we got here or how we get out.

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Three things GAS GAS AND GAS. The price of gas has everything to do with anything we eat buy sell drive ride wear etc. etc.

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A lot of this started long before the gas prices hit all time highs. Look back to the Enron ordeal. IMO, this broke the ice for all of the other corporate scandals that continue to go on today. Corp. Executives lying about their companies performance, share holders lose confidence in their investments and sell out, said compaines lose orders, employees lose their jobs.

Then we can look to the necessary evil we know as the Iraq and Afgan wars. They've gone on for too long at an unfathomable cost.

Subprime mortgages also played a role. But who's to blame for people not being able to do the math themselves. Subprime or not, how can you pay a mortgage payment on a $500K house you financed with a $30K income? Mortgage companies aren't the only ones to blame. Who's needs a McMansion anyhow? 6000 Sq. Feet for a family of 3-4?

The Telecomm industry tanked after Y2K failed to meet expectations. Many of the telecomm companies planned for everything to shut down at the stroke of 12 so they doubled up on inventory as did the manufacturers of the equipment. The clock struck 12 and nothing happened. Now they sat on excess inventory and pulled their orders. Many of the CLECs (Competitive Local Exchange Carriers) who were the beneficiary of the deregulation of the telecomm industry were now in financial ruin and went bankrupt. This hurt the larger mfgrs who self financed their customers (CLECs). Millions upon millions of dollars in new/unused equipment was scrapped. Literally thrown away and written off the books.

Now that Broadband was pulled from the most recent stimulus package, the telecomm industry may be in for another big blow. I think the only way to survive is for the remaining few large companies to consolidate/combine and go back to the pre-deregulation era.

And of course there is the oil industry. Affected by mass industrialization in developing coutries that has been occurring for the past 30+ years. Vehicles are getting bigger every day. Trucks/SUVs are yet to hit a consistant 20MPG rating. Cars that can fit into the box of the average truck only getting 34MPG (SMART Car)? Maybe we can blame the auto industry as well. It's long been argued the auto and oil industry are in bed together. I believe it.

But in the end, I blame "Joe Consumer" for our mess. We've grown into a society of living in excess. Big vehicles, big boats, big houses, big loans, big payments, and a "must have" big ego mentality with special interests so we elect incompetent politicians to ensure we get what we want.

Just my 2 cents.

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I agree with LEP7MM, there are many things that have caused this crash. Most everything has something to do with poor decisions and or greed.

We all want it all from the start(why can't I have what he/she has) and don't want to wait for the things we desire, so we extend ourselves. Then comes the bump in the road and it doesn't have to be catastrophic and we start falling behind. I think the huge jump in gas prices did cause a few people to go over the edge cuz it does affect the price of everything.

Walls Street greed and in some cases over the legal edge on things played a huge part too.

One of my major opinions on why we have these problems is that major US companies are investing in building manufacturing plants overseas instead of here. Whether it is for cheap labor, cheaper taxes or just sheer profits and corporate greed, it is killing us and our economy. We need the stability that Manufacturing jobs provide. It is getting more difficult to even find American made products any longer.

CEO greed. Here is a snippet from Economic Policy Institute.

Quote:
In 2005, the average CEO in the United States earned 262 times the pay of the average worker, the second-highest level of this ratio in the 40 years for which there are data. In 2005, a CEO earned more in one workday (there are 260 in a year) than an average worker earned in 52 weeks.

The 1980s, 1990s, and 2000s have been prosperous times for top U.S. executives, especially relative to other wage earners. This can be seen by examining the increased divergence between CEO pay and an average worker’s pay over time, as shown in Figure A. In 1965, U.S. CEOs in major companies earned 24 times more than an average worker; this ratio grew to 35 in 1978 and to 71 in 1989. The ratio surged in the 1990s and hit 300 at the end of the recovery in 2000. The fall in the stock market reduced CEO stock-related pay (e.g., options) causing CEO pay to moderate to 143 times that of an average worker in 2002. Since then, however, CEO pay has exploded and by 2005 the average CEO was paid $10,982,000 a year, or 262 times that of an average worker ($41,861).

1965 the average CEO made roughly 24 times what the average worker made compared to today 262 times. No one can tell me that it has no negative impact. Could that money be better spent within the company/corporation on improving efficiencies, production equipment, building better plants, etc? I think so.

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upnorth brings up a good point about CEO pay. The bigger the gap between the CEO compensation and the blue collar worker will create an atmosphere of reduced moral. This ties directly back to the comment of we all want it from the start. Thus, the "worker bees" of the company become less productive.

One thing that I didn't mention in my prior post is how NAFTA ties into our current situation. It opened the door to outsourcing America and began the snowball effect almost immediately.

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Dave, shouldnt you be reeling in huge Lakers right now?

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Dave, shouldnt you be reeling in huge Lakers right now?

Getting ready. grin

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Yes, gas played a part, but it didn't ruin the economy. The housing market was the big player in that. The bill that was passed during the Clinton years to get everyone into homes shattered it. Houses went up in price way to fast and couldn't keep up. Then you have folks that bought the 400k house with two new cars, all new furniture and what not.

Now you add to that the high costs of gas and your budget is shot. You need gas for life, plain and simple. It raised the price of everything. It mighta been the breaking point, but it was a long time coming.

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Most of the posts here are correct...it was the housing bubble that is at the heart of this mess. But how did the housing bubble come to be?

Part of it was a relaxing of laws that allowed mortgages to be 'bundled' together in packages as investments. This was supposedly to reduce the risk. It was assumed that a few of the mortgages would go bad...but if they were bundled together with a bunch of others, there would be enough good loans in the package to offset the losses of the bad loans.

This allowed for greater risk assumption at the origination stage, and allowed for...let's generously say "creative"... alternate financing structures (such as interest only payments, ARMs, etc). By lowering the cost of financing, more customers could purchase homes. I saw an acronym the other day...NINJA home loans. NINJA = No Income, No Job or Assets. And for already qualified home owners, with lower financing costs the same level of debt service could support higher principal loan values. Couple that with the increased demand for homes, and home prices rose. The bubble.

Beyond, by the way, what the market would otherwise support. IF the market determined that there weren't any more (or enough) qualified customers buying homes, resulting in not enough houses being sold, the Federal Reserve would lower interest rates and pump more dollars into the economy to keep home sales flowing and keep the home prices up, further contributing to the bubble.

People who had equity in their homes would refinance or take out a second equity loan and use that to buy...well...something else.

To the point where our economy was two-thirds consumption. We consumed more than we produced. My golden retriever could understand that that was unsustainable.

So...the bubble popped. And as the loans default, those 'bundled investments' are going bad (see Fannie Mae and Freddie Mac, among others). As homes lose value, people are upside down in their mortgages. Most can still make the payments...but now there is no more equity for consumption. No more new car every two years; no more (or fewer) expensive vacations; no new furniture every two years...

The stock market is declining as investors are revaluing companies based on lower asset (real estate) values and lower sales (from less consumption).

This is a permanent 'reset' of our economy as consumption needs to get more in line with production in our economy.

And the stimulus package will only make things worse. The government wants to get people spending again? No no no. The solution should not be to effectively increase the housing bubble.

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Yes, gas played a part, but it didn't ruin the economy. The housing market was the big player in that. The bill that was passed during the Clinton years to get everyone into homes shattered it. Houses went up in price way to fast and couldn't keep up. Then you have folks that bought the 400k house with two new cars, all new furniture and what not.

Now you add to that the high costs of gas and your budget is shot. You need gas for life, plain and simple. It raised the price of everything. It mighta been the breaking point, but it was a long time coming.

I got to go along with that,with adding deregulation paved the way for the greed that made all the loans to just about anyone! Gas prices made a huge impact on those who should have NEVER received a loan! and just getting to their jobs broke them when most all their income was committed to house payments had to go to gas

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I know this gets complex, but if people hadn't spent lots of cash over the years, where would the economy be now (as a whole)?

If not spending money causes job loss, then if we never spent we wouldn't have those jobs to lose, right??

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Its kind of vicous circle really. We are screwed if we do, screwed if we dont. There are tons of factors to it but it all comes down to spend or not to spend. I guess I would have taken a slower, steadier pace over the boom we had in the 90's but in the end we may have just delayed the inevitable.

Im sure that the gas prices did play a big part in the whole ordeal as of late since just about everything we have is related to its price in one way or another. I do think like everyone pretty much said, its a combonation of a bunch of factors that really add up and the fuel was a tipping point.

I dont know how it affected everyone else last summer but I didnt make any weekend trips up north. I stayed in town and spent just about the same to do that. We still did a BWCAW trip and a Canada trip but it was more of a save up for it kind of trip. The typical head up north for a weekend was impossible because fuel was just too much.

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I know this gets complex, but if people hadn't spent lots of cash over the years, where would the economy be now (as a whole)?

If not spending money causes job loss, then if we never spent we wouldn't have those jobs to lose, right??

Spending cash on items that create jobs here would have helped. Spending cash on items that don't create jobs here create a bubble to easy to burst. You can't base the whole economy on the housing market.

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I agree with up north there are 4 major industries that run our economy no more no less. In no particular order #1 oil, #2 stock market #3 banks and #4 realty. IF you look at all 4 of these industries as bubbles we ahve always had one or two of them burst over the course of any year but we always had the other two to keep the economy steady. What your seeing now is all 4 bubbles bursting at once. If history repeats it's self and you look at the past depressions/recessions they have lasted at least 12-14 years before the economy fully rebounded. Doesn't mean it was really bad every year, butin my opinion it's a cycle that we have to go through, a stimulus package isn't going to help our country. You have to wai out the storm so to speak. Unfortunatley some won't make it but that's life. Entirely my opinion everyone has one, thought I would throw mine in.

smile

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gas prices were a symptom of what created this recession that is soooo bad. Americans from the 90's to the present were looking to get rich quick and/or aquire what the rich have. because of this attitude we bought on credit, overinvested in "hot" stocks creating bubbles (tech, housing, banking, oil) when oil rose so high it was because investors made it rise on hype and we let them. Housing is similar we were buying houses that rose in prices beyond reality. Money is no longer made the old fashioned way, by providing a product or service. Money is now digital. So much of it exists only because of accounting magic instead of in real assests like products or cash.

sorry if that rammbled

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I agree with up north there are 4 major industries that run our economy no more no less. In no particular order #1 oil, #2 stock market #3 banks and #4 realty. IF you look at all 4 of these industries as bubbles we ahve always had one or two of them burst over the course of any year but we always had the other two to keep the economy steady. What your seeing now is all 4 bubbles bursting at once. If history repeats it's self and you look at the past depressions/recessions they have lasted at least 12-14 years before the economy fully rebounded. Doesn't mean it was really bad every year, butin my opinion it's a cycle that we have to go through, a stimulus package isn't going to help our country. You have to wai out the storm so to speak. Unfortunatley some won't make it but that's life. Entirely my opinion everyone has one, thought I would throw mine in.

smile

Thats part of americans getting the brunt of this all banking & investment based econoomy! Can you name much anymore that has a legitimate Made In The USA lable? Its all gone overseas Mexico anywhere it can be made cheap! And then CHEAP is what we get!

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100% of the blame is on the federal government. it all traces back to the government. commodities speculation with the oil prices, who in washington is tied to the oil industry i know of two for sure bush/cheney. who is tied to wall street, that would be hank paulson secretary of commerce. how many senators and congressman do you think are in bed with the credit and insurance industry? "i can get your son/daughter into harvard if you vote this way...wink wink" it's not all bush, because in those 8 years the democrats controlled the congress, they made the laws. it goes on and on.

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It has alot to do about 1% intrest rates after 9/11 in a houseing market that heated up at that time. And than EXPLODED after that.

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One last thing we are not in a depression I'm getting sick of people using this term.

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Economy Ruined in phases.....

1. Americans borrowing over there heads.......

we brought this on with over borrowing and not knowing our own future. What ever happened to the 20% down rule in borrowing???

No, gas isn't the reason. Its Americans wanting to finance the American dream.

Oh and just so you know... I'm just as guilty as the next for over borrowing so I'm to blame as well..

you're right. and it also was the government's policy of borrow and spend which looks like that's gonna continue, along with print and spend. hopefully, the american people have woken up and are getting back to belt tightening even if the federal government is refusing to

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