Archive for March 2012

Sheer Moronicism

March 21, 2012

I know it’s been quite a while since my last post.  I’ve been busy.  Deal with it.  I’d like to comment on the utter stupidity of today’s journalists, and how they should try to at least hide their support for our wonderful leader who has managed to spend more money in 3 1/2 years than all previous Presidents combined.

Here is the link to the aforementioned stupidity:

http://money.cnn.com/2012/03/21/news/economy/gas-prices-impact/index.htm?iid=HP_LN

There are so many incorrect assumptions and such poor data usage in this article that it makes me nauseous.

Where shall we start?  The first problem is comparing it to 1981.  In March of this fine year, the median house price was $66,700 and average price was $81,600.  Median is a better metric here, since the 1% obviously drove up the average, and they’re not too concerned about gas prices.  If we compare that to Oct, 2011 (the most recent data available), we’re looking at $212,300.  I don’t know about you, but I can buy a lot of gas for $130k.  And how much did your cell phone cost in 1981?  Or your extra car?  Or your computer?  Or day care for you child?  Or college?  Exactly. 

The next dubious argument is comparing the cost of gasoline to spending, as opposed to income.  There are many things that can assist with increases in spending (hence reducing gasoline’s overall percentage of the total).  Massive amounts of debt.  Trillions in credit card debt can buy a lot of stuff.  How about inflation?  Retail sales were up last month because the same crap costs more money.  It should be compared to net income (i.e. – what people have to actually spend), and even more so it should be compared to residual disposable income (what’s left after you pay all your bills).  Personal savings rate can be used as a proxy for this, and came in at 3.5% in November of 2011.  Median Household Income in 2009 was $49,777, and I highly doubt it has increased over $12,000 during the “Great Recession”.  For the sake of argument, I believe these numbers to be accurate (all were obtained from the US Census and BEA), and reasonably recent.   Using some really basic math, the “median” family is saving $1,742 a year, and drives about 13,500 miles a year at an average MPG of 25 = 540 gallons.  This means the current cost of gas is forcing a NEGATIVE savings rate among the median household.  No big deal, eh?  This is why credit card debt is back on the rise.

I haven’t even mentioned the inflationary forces because of the high prices.  Every product you buy off a shelf had to get there via a semi, barge, plane, or some other neat transportation device requiring fuel.  The high prices are going to force consolidation in the transportation industry, skyrocketing airfare prices (already occurring), and increases in prices of imports, while reducing exports.  Ensuing high inflation will force the Federal Reserve to increase interest rates, which will force banks to increase mortgage and other loan rates, further depressing the housing markets, and possibly forcing another taxpayer bailout of the “TBTF” financial institutions.  This will force an increase in taxes, an increase in the National Debt, or most likely both.  Companies will also be forced to lay off their workers in an already unstable labor market, increasing the number of people on public assistance with fewer people to support them.

Just a quick reminder – the title of the article was “Rising Gas Prices Aren’t As Bad As You Think”.  Perhaps these writers should try to use their brains a little before posting drivel.


Follow

Get every new post delivered to your Inbox.