Explain economics

Discussion in 'Economics' started by abducens, Jun 1, 2005.

  1. Earlier in the year oil went up and food prices etc. also go up. That was generally bad for the economy since it worried everyone about inflation. Plus people spent more on gas and less on other things.

    Now I read that its ok that oil goes up and industrial production across the board is decreasing because that shows there is no inflation. Can someone explain the good in oil up and production down. Is that recession?Is it possible? thanks

    :confused: :confused: :confused: :confused: >me
  2. Pathus


    Many Things made out of oil and oil related processes and energy use. As costs go up, supply goes down. Economics 101.
  3. ig0r


    Well, I don't know about production going down being particularly good for the economy, but it is rallying markets simply because of the fact that it indicates less inflationary pressures to the fed; thereby reigning in rates.


  4. TGregg


    Well for one thing, Economics is about as soft a science as daytrading. There's even an old joke about how economists have many hands, because they are always saying something, then qualifying it with an "On the other hand. . . "

    Next, there's plenty of political slant. For instance, there are plenty of folks who will tell you (and argue in this very thread) that punishing people who make money by taking it from them and rewarding those that sit on their butts all day by giving it to them improves the economy. They will tell you that the reason the USA is the economic/political/military powerhouse of the world is because of welfare - in spite of how pretty much every other country in the world has more of it.

    And finally, there's no real lab. You can't just change one variable and see how it affects your test economy. There's always mountains of different things taking place, and many times there's self-correction. Like supply, demand and prices. Supply increases, so price drops to increase demand. Meanwhile, low prices are threatening to lower supply.

    Maybe now that we have all these huge OL game worlds, some folks can do some economic tinkering. Anyway, I hope your question was "Why is economics so confusing?" rather than the particular one about oil and production. Mostly because I have no idea about the latter one. :)
  5. Pathus


    Welfare is the biggest waste of money ever.
  6. cable


    ...Along with all the other government-mandated programs!

    It would be great if welfare was privatized, and people starting out could *choose* to pay a thousand bucks a year for a 5 year term or something as Unemployment Insurance, but making ME pay when there is no chance in hell I'm going to use it is just another 'raping of the producers'. I wouldn't even mind it if it stayed the same, but was purged of the abuse and corruption -- I have no problem paying a BIT so that a single mom who just got dumped by her abusive husband can buy her kids food or whatever until she finds a job, but when my buddy (true story) is working at a Jewelry store under the table, writing a music column for the local newspaper under a nom de plume, and collecting welfare at the same time, there's something wrong with the system. His garage is filled with 4-wheelers, snowmachines, etc. that I don't buy because I have to EARN my money. It's not a handout for me, so I respect my cash.

    It is corruption and inefficiency that is killing our society, and all governments seem to have it through and through. Paying the government should be optional, and in exchange for services rendered.
  7. I actually support welfare. And I've been told that I'm the biggest neocon on this forum :D

    What I think is more wasteful is all these other government programs that have a direct correlation between annual cost increase and the more hideous the results.

    I think there is significant room for welfare reform, but overall if you're not rasing children, and you have an able body, there is no reason why you can't find employment and make a living. People like this should be kicked off welfare and forced to find a job.
  8. Another thing I'd like to see is the United States bring into force monthly Baby Bonus checks and integration of Head Start into every child's education, starting at an even earlier age then they have now along with daycare and other after school programs provided in every elementary school in the country.

    I'm a big sap into this whole investing in the future :D

    I'm pretty much textbook libitarian.
  9. Actually nobody has ever claimed that welfare is good for the economy, you made it up. The dems believe welfare is necessary evil and part of the social safety net, the republicans believe it's unnecessary evil and until they (or their loved ones) are personally not in trouble they don't need no stinking safety net.

    The real issue is distribution of profits between workers (aka american middle class and working poor) and business owners (aka the rich). It's the existence of very strong and prosperous middle class based on "fair" distribution of profits that turned American into economic/military superpower.

    Both employers and employees work, they are not on welfare, they work together to create a product and generate profits, both depend on each others, both believe they are entitled to a bigger share of the pie.

    Now that american middle class is brainwashed and not represented in the government, the unions are weaker than ever before and both political parties are in the pockets of big business which doesn't even have to deal with american workforce any more as it can and does hire overseas, there is no wonder that the gap between the rich and the rest is growing exponentially, the middle class is shrinking and it's only a matter of time before the rich few percent will own everything in the country and America turns into another Argentina.
  10. Perhaps I should reign in the topic and interject with my (semi-) qualified opinions....

    If energy prices go up, then everything goes up. Oil is both an input to production and a necessity to transporting those products. Oil costs = inflation. This is why looking at the core CPI is pure bullshit; it doesn't reflect one of the most important factors of inflation (cost-push).

    Prices of most things are going up. If one uses inflation (agian, non-core) figures from the CPI-U over teh last three months, our 10-yr yields are around -2.4%. Yields are still negative if you use the PPI for an inflation estimate. Saying that oil price increases are not an issue is absolutely stupid.

    If production declines in this circumstance, it means that goods are not being sold, probably because the higher costs have reduced consumer spending. This is absolutly inflationary.

    On the other hand (lol) the Fed looks at the core CPI when assessing inflation. the core is steady, so the Fed had ease up of the rate hikes. Personally, I think this is royally stupid, as the inflationary effects of high energy will be seen for an entire inventory cycle. So we will see an even higher discrepancy between yeilds (assuming the current bond trends don't continue) and inflation. Having high negative real rates is not good for investment, especially when so many dollars are held abroad.

    As far as economics as a science, I have to agree that the whole subject is as soft as jello. Economics is an exercise in rational thought and debate, not a science (but then why do I have a BS?????). And, though I am against welfare personally from moral and economic standpoints, economics is the study of welfare and resources. It can be argued that by increasing the general standard of living through welfare, it is economically beneficial to all Americans.

    On the other hand..........
    #10     Jun 1, 2005