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Infographic: 5 Ways Falling Oil Prices Impact the Economy

2 pointsby skhatri11over 9 years ago

1 comment

brownbatover 9 years ago
I keep hearing pundits try to explain why lower pump prices haven&#x27;t turned directly into consumer spending.<p>My crazy theory, and IANAE, is that it&#x27;s because consumers are now finally trying to fix their balance sheets, like banks and corporations have been doing for the last few years.<p>People are just now starting to dig out, fix their retirements or emergency funds.<p>And maybe this is a totally spurious correlation, but look at inflation-adjusted home prices over the last 100 years, and compare it to per capita savings over the last 100 years. You&#x27;ll see some similar inverted pivots. Real home prices start to tick up in the mid-70s, after a few decades decline, and per capita savings reverses, suddenly starts dropping. Maybe people were leaning heavy on their real estate as savings while it was appreciating, and they&#x27;re now reevaluating that, trying to build up a lot of cash as well.<p>(On the other hand, a lot of other things affected savings rates at that time, like the rise of preapproved simple credit, so I might be way off.)<p>tl;dr Money saved from lower pump prices is going right into savings. Might lead to higher consumer spending down the line, we&#x27;ll see.