4Q07 GDP Growth Unchanged at 0.6%
Well, that’s weak. I anticipated an uptick because I expected that inventories would not decrease by as much as originally thought in last month’s advance report.
I would expect that any kind of perk-up in the latter part of this quarter would require those inventories to ramp up pretty quickly.
We shouldn’t be surprised, when gasoline prices go up less money is recycled in the economy. If I understand it properly a greater percentage of the money leaves the country in terms of a oil/gasoline price hike than other imported products. I might be wrong on that, but ordinarily a price hike in most commodities means money is recycled on a different path within the domestic economy and thus doesn’t restrict the overall growth of the economy. On the other hand, a price hike on an import ususally causes more domestic products to be sold and less imports, but in the case of oil where there is no practical alternative, that money is siphoned off the domestic economy and acts as a brake like a tax hike. (Basic Keynesian economics)
The way out therefore is to 1. pump more domestic oil, 2. become more efficient at the use of the fuel, and 3. move to an alternative fuel. The negative alternative is a recession with lower economic output to reduce the amount of fuel. Sounds like Bill Clinton and the Sustainable Growth people are getting what they asked for at our expense.
Comment by dscott — February 28, 2008 @ 12:34 pm