Is it really true that we’re spending about the same for energy today that we did two years ago? Oil is $108 a barrel today; 3/06 it was about $62 a barrel . Given our oil imports of about 10m barrels a day (http://www.eia.doe.gov/basics/quickoil.html), roughly half of which is OPEC oil, for every dollar that oil increases, it removes about $3.65bb a year from our economy ($10m * 365) and sends it to OPEC. So compared to two years ago, we’ve lost about ($46 * $3.65b) $167 BILLION DOLLARS from our economy. Just vanished.

Suddenly, the $120 billion stimulus package doesn’t seem so stimulating, does it?

Oil is only one piece of the overall energy puzzle, but as oil increases, all other energy prices do, too, so while it’s a crude analysis (haha, good one Axe), it’s close enough for purposes of this discussion. Plus, the $167b doesn’t count the whole energy sector. It’s more money out of the economy across the board.

Subprime crisis is another part of the problem, but not just for the reasons that Andy mentioned. The real killer of the subprime crisis is that Americans were fueling the economy through refinancing their homes. Check this graph out that shows U.S. GDP over the last several years once you take mortgage equity dollars out of our GDP production.

http://bigpicture.typepad.com/comments/2005/12/chart_of_the_we.html

For apples-to-apples comparison, mortgage equity withdrawal accounted for $110 billion dollars in ‘06. Much of this is no longer possible because home equity will drop about 30% from the peak, meaning there isn’t any more money to take out. So now economy is out roughly $270 billion dollars, or about 2% of the total GDP of $14 trillion. Those two things alone account for half of our typical GDP expansion of 4%.

Damn Andy, me and you should write a paper or something.

Although the energy stuff has a huge effect on the economy under any circumstance, in this case, I’m gonna have to disagree w/ Axe about the cause of the current slowdown/possible recession. The real estate crisis is really at the heart of most of the bad mojo hitting the fan at the moment. It’s exacerbated by energy issues, but, currently, the price of gas notwithstanding, we’re not paying a whole lot more for energy (as a percentage of GDP or household expenses) than we did two years ago when the economy was going gangbusters.

Every 10-20 years, some clever dick financing nimrod figures out some new way to basically make money off of an economic process as opposed to good, ol’ fashioned selling stuff and doing stuff (goods and services). There’s a basic rule among good, conservative banks that what you want to do is keep running on 15% vig. You give customers less than that on various products, make a bit more than that on your long term investments… go home.

So… Starting back before the Great Depression, you end up with folks who figure out a way to make more money on some version of “the float.” In the 80’s it was junk bonds. In the 90’s it was derivatives. Now it’s bad mortgage risk all pooled into investment categories. Meh. The supposition being, “As long as real estate prices keep going up, most of these bad mortgages will be worth more than the owed principle, and so we’re ok!” Meh-to-the-meh. If it had been done at a fairly small level, no big deal. Real estate always goes up and down, a few investors take a bath. But some (and by “some” we mean hundreds of thousands) of these loans went into investment portfolios of big banks. Oops. You were gambling with… the retirement investments of a couple million Boomers? Whoops!

Short version of future: if the real estate market comes back, even a little bit, this spring/summer, we probably will come out of the (this) recession, because the really bad mortgages are already boinked, and we’ve just now started into a decline based on those effects. If it goes further, and we can’t get things moving a bit… more recession.

My vote: stop spending money on Iraq and do a Manhattan Project style, government funded (or at least encouraged) drive towards clean energy solutions. Long term, the country who figures that out will win.

I’m not an economist, but I do drive by a WalMart every morning and afternoon, and that lot is always full. (so…you know…that makes me an expert of course. ) I see pretty full lots at my local Circuit City and Coscto too. Are people really buying less crap? I actually kinda hope so, but I don’t see it.

The energy crisis is really what’s driving this recession. As fuel prices increase, it increases the cost of EVERYTHING else - groceries, shampoo, tires, electricity, everything. That means less money available to buy crap.

Buying crap is what makes the economy expand.

I’ve been a Democrat my entire life. But the most eloquent campaign position piece I’ve read is this one, about the importance of American energy independence. I highly recommend it.

http://www.johnmccain.com/Informing/News/Speeches/13bc1d97-4ca5-49dd-9805-1297872571ed.htm

…I don’t know all the factors that go into measuring the economys girth…

Interesting. I never really thought about it, but I always thought about economic growth, when I anthropomorphized it, in a vertical sense, like height or whatever. I suppose though, as my friends in college pointed out, the truest way to, ah, measure is volume (via displacement) since it incorporates both length and girth. I tried to make that as vague as possible so it’s safe for work, but just to be clear: if you read that as dirty, you did it right.

Also, I believe that the term negative growth was started by a pharma.

In all honesty though, not knowing the financial definition of a “recession”, this made me laugh so hard.

Bush makes me laugh because he’s so out of touch with reality. I wish he’d go far far way to never return. I can’t stand him, or McCain. 8 more years in Iraq? Maybe I’ll move to Iceland or something. The US dollar will end up crashing if McCain the war monger wins the general election, and unfortunately I don’t have a pile of gold buried in my backyard. Or we can keep letting China and filthy rich Saudi princes buy key US financial interests. Everything will be fine as long as we keep “attacking” Al Qaeda in Iraq and keeps Americans safe!… Right…..

I also think the stimulus package is a fucking joke. :p /rants away