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3/8/2016 HowDoesOilImpacttheEconomy?3MajorAreasofEconomicConsequence:TheImpactonInflation,ConsumerSpending,andAutoSales.

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Postedbymybudget360indeflation,economy,Employment,energy,government,inflation,oil, COMMENTS
recession
2Comment

2008willgodownastheyearwiththehighestmarketvolatility.Crisisaftercrisisseemedto
hituslikeacontinuousbarrageofwavesfromtheoceanofeconomicnews.Thehousingmarket
continued to collapse resembling a housing market so weak, we have to go back to the Great Enteryouremailaddresstoreceive
Depressiontofindasimilartime.Thecreditmarketsarestillincompletedisarray.$50trillion updatesfromMyBudget360:
inglobalwealthhasevaporatedinoneyear.Theautomakershavefallenontoughtimes
and emblematic symbols of American manufacturing like GM and Ford stand steps away from
beingdismantled.In2008wealsosawtheincredibleoilbubblepeakandburstsodramatically Subscribe
thatitcausedmanytopause. 100%Private&SpamFree.

We need to rewind a few months to get our mindset around the energy issue. During the
Presidentialcampaign,thethemeofenergywassoimportantthatitcommonlyfounditswayinto HotArticle:Comparingtheinflatedcost
thestumpspeechesofallpoliticians.Keepinmindthatoilatthistimewasflyingover$4agallon oflivingtodayfrom1938to2013
andconsumersfelttherewassimplynoceilingforprices.Everydayaspeopledrovebytheirlocal
gasstationalltheyneededtodowasrolldowntheirwindow,glanceupatthebigfontprice,and
theprobabilitywashighthepricewashigherthanyesterday.

It is also the case that much of the auto sales numbers have collapsed in tandem with the oil Subscribeinareader
bubbleyetitwouldbeamistaketocompletelyattributetheoilburstwiththecollapseintheU.S.
automakers.Ifoilpriceswerethemainculprit,U.S.automakersshouldbebackinfullspeedwith
oil now trading at $36.50 a barrel. This massive market volatility is unseen and very few PopularAllTime
peoplehavebeenalivetolivethroughsuchavolatilemoment.Atthispoint,werelyonhistorical
dataandprecedentandhopethatwecanlearnfromourpasterrors. 1.HowmuchdoestheAverage
AmericanMake?BreakingDowntheU.S.
Todaywearegoingtoexaminetheimpactofcollapsingoilpricesontheoveralleconomy.Wewill
HouseholdIncomeNumbers.
lookattheimpactithasonconsumerinflation,autosales,andalsoconsumerspending.

ImpactonInflation 2.Top1PercentControl42Percentof
FinancialWealthintheU.S.How
Whenwelookatoilpricesintermsofconsumerinflation,wenowrealizethatthisisoneofthe AverageAmericansareLuredintoDebt
strongestcomponentswhytheConsumerPriceIndexiscollapsingandnowweareonprecipiceof ServitudebyPromisesofMegaWealth.
a dangerous bout of deflation. The menace of deflation is that it renders any and all debts
dangerousandacountryasindebtedasours,simplycannotriskthatprospect.Letuslookatthe 3.Iscollegeworththemoneyand
mostrecentdatafromtheBLSregardingtheCPI: debt?Thecostofcollegehasincreased
by11xsince1980whileinflationoverall
hasincreasedby3x.Dilutingeducation
withforprofits.andsaddlingmillions
withdebt.

4.ThePerfect$46,000Budget:
LearningtoLiveinCaliforniaforUnder
$50,000.

5.FamilyBudget:HowtogoBrokeon
$100,000ayear.WhytheMiddleClass
hasahardtimeLivinginExpensive
UrbanAreas.

6.LiningupatMidnightatWalMartto
buyFoodispartofthenewRecovery.
*Clickforasharperimage
BanksofferingMattressInterestRates.
Itisincredibletothinkthattransportationisrunningatacompoundannualrateof48.1forthe TheInvisibleRecoveryOutsideofWall
previous 3 months and energy is collapsing at 69.3. The unadjusted 12month data is even Street.
more telling. 8.9 for transportation and 13.3 for fuel. What does this mean? Energy and
transportation have been seeing price destruction over the last year accelerated by the last 3 7.YouCannotAfforda$350,000Home
months.ClearlythereareotherareasweightedintheCPIdatasoitisimportanttogatherhow witha$75,000HouseholdIncome!

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3/8/2016 HowDoesOilImpacttheEconomy?3MajorAreasofEconomicConsequence:TheImpactonInflation,ConsumerSpending,andAutoSales.
muchenergyandtransportationmakeupfortheindex. 8.Crisisofgenerationsyounger
Americansmovingbackhomeinlarge
LookingattheBLSCPIUinformation,wegetthefollowingweighting:
numbers.Studentloandefaultrates
Overallbase:100 surginglargelyduetoforprofitcollege
expansion.
Transportation:17.688

Householdenergy:4.215 9.Thenextmassivedebtbubbleto
crushtheeconomy10charts
Over 21 percent of the index is based on items sensitive to energy prices and transportation. examiningtheupcomingimplosionofthe
Giventhatautosalesareanemicandenergyhasfallenoffacliff,isitanywonderthatthelast studentloanmarket.$1trillionin
threemonthsforoverallconsumerpriceshasstartedtolookmorelikedeflation?Takealookat studentloansanddefaultssharply
3monthchangesfortheBLSoverthepast10years: increasing.

10.Welcometothenewmodelof
retirement.Noretirement.In1983over
60percentofAmericanworkershad
somekindofdefinedbenefitplan.Today
lessthan20percenthaveaccesstoa
planandthemajorityofretired
AmericanslargelyrelyonSocialSecurity
astheirdefactoretirementplan.

PopularCurrenthits

HowmuchdoAmericansearn?Whatis
theaverageUSincomeandotherincome
figures.

WhatdoesanAmericawithnomiddle
classlooklike?

Thedayofreckoningforglobaltotal
debttotalcreditmarketdebtupfrom
In fact, Novembers drop of 1.7 percent was the biggest on record. This wasnt a one month $28trillionin2001to$53trillionin
event.InOctobertheindexwentdown1percentandinSeptemberitcameinneutralatzero. 2012.
Bottomline?Transportationandenergyhaveaddedtothedeflationfire.
Thecompressionofgenerations25
ConsumerSpending millionadultsliveathomewithparents
becausetheyreunemployedor
Consumerspendinghasalsobeenimpacted.Letusfirstlookattheoilbubblewithnationalretail
sales: underemployed.

Whatdoestheriseofdollarstoressay
aboutthemiddleclass?

Thecatastropheofoureconomyforthe
youngAmericanworker.

Categories

401k

arizonarealestate

autodebt

autoloans

autoloans

autos

averageincome

babyboomers

bailout
Coupleofthingsaregoingonhere.Retailsalesarefallingatratesnotseenindecades.Eventhe
fall of oil from $147 a barrel to the current $36 a barrel has done very little to encourage bankruptcy
shopperstospendmoreduringthiscrucialholidayseason.
banks
Howmuchoildoweconsume?Letusfirstlookattotalmonthlyfuelconsumption:
blackswan

bls

bubbles

budget

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3/8/2016 HowDoesOilImpacttheEconomy?3MajorAreasofEconomicConsequence:TheImpactonInflation,ConsumerSpending,andAutoSales.
californiaeconomy

californiahousing

calpers

calstrs

Canada

casinos

centralbanks

CEOsalary

chapter7

chinarealestate

chinastockmarket

college

commercialrealestate

corporatepower

costofliving

Onaverage,weconsumeroughly20millionbarrelsofoilperday.Letusdosomequickmathto cramdowns
giveyouanideahowmuchmoneyonoilwasspentduringthetwopeakmonths:
creditcards
Juneaveragebarrelprice:$133.88
crooks
Averagedailybarrelsconsumed:19.55millionperday
currency
Julyaveragebarrelprice:$133.37
debt
Averagedailybarrelsconsumed:19.41millionperday
debtconsolidation
Junetotalamountspentonfuel:
deflation
$133.88x19.55millionx30days=$78,542,931,102
dollarcostaverage
Julytotalamountspentonfuel: dollarstores
$133.37x19.41millionx31days=$80,250,062,700 economy

So in two months alone, we spent over $158 billion in energy. That is a stunning amount of education
moneyespeciallygiventhishitsconsumerssquarelyinthepocket.Nowletusrunthenumbers
forthelatestmonthwithaggregatedata,November: Employment

energy
Novembertotalamountspentonfuel:
$57.31x19.41millionx30=$33,371,613,000 EuropeanUnion

AndwithfuelgoingevenlowerinDecember,theoreticallywehaveaddover$50billionamonth fcic
inpurchasingpoweryettherelationshipisntexact.Whyisthat?Muchoftheeconomyofthe
FDIC
decade relied on continually financing new and newer debt. Think of auto leases for example.
Thepremiseatleastfromadealerperspectivewasthatconsumerswouldbetradingintheircars featured
every3yearsorsoanddoingthisadinfinitum.Yetthismodelbreaksdownwhencreditstops
federalreserve
likeithas.Thefactthatcreditisntavailableisnttheproblemnecessarily.TheissueisAmerica
isalreadysaddledwith$49trillioninliabilitiesandaseriousquestiontoourabilitytopaythat fhfa
isnowupintheair.ThatiswhyIhavearguedthattheFedandU.S.Treasuryaregoing
FICO
to do everything within their power to destroy the dollar and try as best as they can to
createinflationtogetusoutofthisdebt.Deflationwouldbetheultimateendgamescenario. floridahousing
Yetcreatingtheecologyforanenvironmentforhyperinflationisntexactlythewaytogoeither:
foodbubble

foodstamps

foreclosure

foreigncurrencies

forex

frugal

gambling

gimmicks

gold

government

healthcare

homeequityloans

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3/8/2016 HowDoesOilImpacttheEconomy?3MajorAreasofEconomicConsequence:TheImpactonInflation,ConsumerSpending,andAutoSales.
housing

ibanking

ibonds

income

inflation

interestonly

investing

Japan

LasVegas

lawschools

leverage

loanmodification

lossmitigation

lowwagelabor

markethistory

AutoSales medianhouseholdincome

Itgoeswithoutsayingthattheoilbubblehadaseriousimpactonautosales.Letusfirsttakea mediannetworth
lookattheoverallmarketwithdatafromNovember: middleclass

millionaire

monetarypolicy

mortgageequitywithdrawal

mortgageinterestdeduction

mortgagetaxdeduction

mortgages

negativeequity

networth

nevadarealestate

notinlaborforce

oil

operationtwist

optionarms

orangecounty

peratios

pensions

phoenixrealestate

ponzischeme

Youllnoticethattheonlyareathathasseenapositiveyearoveryearchangeisforsmallcars. ports
Thisinlargepartwasduetothesurgeinvehiclepurchasesduringthefirsthalfoftheyearwhen povertyinus
consumers shifted their buying habits drastically. Yet even this category in November got
hammeredjustlikeeveryothersegmentoftheautomarket. productinflation

MuchfocusiswiththeU.S.automakersbutmakenomistake,theforeignautomakersarealso prosper
facing a challenging landscape. The auto market in general is facing a serious industry shift. psychology
Theymaychoosetoblamethecreditmarketsbutthereissomethingmuchbiggergoingonhere
that has been built over decades. That is, the buying habits of Americans will now need to quantitativeeasing
change. realestate
Conclusion recession

There is no question that oil prices have reshaped our current economy. But now that oil is refinance
trading at 4 year lows, we realize that automakers werent faltering simply because of high oil
retirmentplanning
prices but also the unsupportable amount of consumer debt being carried around by many
Americans. With balance sheets decreasing and unemployment skyrocketing, that additional s&p500
moneysavedonlowerfuelishelpingbluntlowerorstagnantwagesandalsotoservicecurrent
savings
debt.Themodelofbuyandtradeupincarsisgoingtobetemporarilystoppedjustlikethebuy

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3/8/2016 HowDoesOilImpacttheEconomy?3MajorAreasofEconomicConsequence:TheImpactonInflation,ConsumerSpending,andAutoSales.
andtradeuphousingmentalityofthepast30years. secondhomeloans

Asidefromsmallerfamilysizesandababyboomerpopulationlookingtodownsize,youhaveto shortsale
ask where is the money going to come from to get things going again? Maybe boomers were
smallbusinesslending
counting on large nest eggs that have been caught up in that $50 trillion destruction of
wealth.Cheapoilisclearlynotapanacea.Oilcangoto$15abarrelbutwhatuseisitifyou smallbusinessloans
havenojoboryourwagesarebeingslashed?Ifanything,itissimplyaconsolationtothebigger
socialsecurity
picture.Andthepriceofoilhasfallenbecauseofdemanddestruction.Ithasnotfallenbecause
ofahealthyandstablemarket. stagflation

Ihaveneverseensomanyeconomicproblemsstrikeatonceinmylifetime.Ithinkmostpeople statebudgetdeficits
areignoringoilpricesandsimplywant2008tocometoaquiteend.Butwhatmonthof2008
studentdebt
hasbeenquite?
studentloans

suckerrally

taxpolicy

Ifyouenjoyedthispostclickheretosubscribetoacompletefeed taxes
andstayuptodatewithtodayschallengingmarket!
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