From Zero Hedge:
Once again the ABC Consumer Comfort index indicates that it is leaps and bounds more relevant than the ADP Private Payroll number. With increasingly less relevant confidence indicators out of UMichigan and the Conference Board, which lately only seem to “poll” 20 people with a $1MM+ Schwab trading account, it is worth noting what a true polling index says about the economy. And it isn’t pretty:
“Soaring gasoline prices slammed consumer sentiment into reverse this week, threatening the slow recovery in economic views that’s been under way. With gas now at record high for a February in Energy Department data back to 1990, the weekly Consumer Comfort Index dropped by an unusually steep 5 points to -46 on its scale of -100 to +100.”
I don’t know about you, but I actually stop to think about filling up – and have started making travel plans with gas prices in mind. And I’m in a two-income household…I can imagine what it is like for those who are either unemployed or who have suffered some measure of income reduction over the past year or two. Things like rising gasoline prices just kick economic activity right in the gut. Lost in all the stories of America’s economic rise is the fact that until cheap overland transportation became available, most of what is today the United States was economically worthless. Take away cheap gasoline, and it is a huge hit to our viability – you just have to consider how much of our goods are moved by means of fuel oil.
The run up in prices, by the way, is not caused by shortages (the world is rather awash in oil at the moment), nor is it really caused by troubles in the oil producing areas (it does push speculative price rises, but not as much as we’ve seen); it is caused by the massive printing of fiat money by the United States and other major world economy (little noticed in the West – because China’s boosters prefer we not know it – is that China printed more, in relation to their economy, than we did). When you increase the supply of money out of relation to the growth of the underlying economy, then the money becomes worth less – but the producers of tangible assets will not and cannot accept less than actual value for the products they sell – prices rise as a result…and as money has been printed, speculators have started to buy up hard assets in anticipation of yet more printing. It is quite the vicious circle.
This rise in prices could be catastrophic for our economy. Over the years, you can track steep increases in unemployment with steep rises in oil prices. Each time it has happened, after a short lag time, unemployment has shot up. And this time it could be much worse, as prices of everything else are shooting up right alongside oil. If we don’t get this swiftly under control, we may return to the “stagflation” of 1979-80 where we had the horrible event of stagnation and inflation.
Blogs For Victory 