Demand destruction starts to kick in – from Fund My Mutual Fund:
It looks like the demand destruction has begun in the U.S. gasoline market despite the 2% payroll tax which gave every worker an immediate raise on Jan 1. This is also a bit concerning from the aspect we are in tax season, and in a note I read two weeks ago, Americans are expected to get back $300B – which in and of itself is a massive stimulus. Hence, if there is anytime these higher prices can be shouldered it is now … yet Mastercard is reporting the 5th consecutive week of lower gasoline sales…
The prices continue to rise as demand continues to drop – saw $3.93 at my local gas station this morning, up 4 cents from a couple days ago. The thing here is that this is impossible – you can’t have rising prices with declining demand. But, never fear, in Obamunism, all is possible – especially given that Bernanke has printed up trillions in an effort to keep stock prices high.
This is going to get really bad – as more and more money is being absorbed by the basics (food and energy), less and less will be available for everything else. Probably the only thing that is keeping us barely afloat right now is that payroll tax cut…but if gasoline really does go to $5 a gallon, any positive economic effect of that tax cut will exceeded by the negative effect of higher fuel prices. I don’t see an easy way out of this…
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