The tale of two commodities and the "wealth effect"
Commodity #1
Housing prices drop, depleting average wealth and changing the market. The 'Wealth Effect" states that as your assets decrease in value, your spending will drop.
People's actual response? "Meh."
Commodity #2
Gas prices rise, causing the cost of everything else (except houses) to sky.
Also, CNN devotes a new section to it's site referred to as 'pain at the pump' with articles like 'viewers sound off,' "How long do you have to work to fill your gas tank?" and "Coping with high gas prices." Even Congress vows to fleece the fleecers.
People's actual response? Stop driving - 11 billion fewer miles were driven in March alone while Amtrak's May ridership rose 12.3 percent! - and dump the SUV.
See? All commodities don't act the same. Housing issues can be managed, while transportation costs, not so much. Making guesstimates about oil and gas prices based on housing economic factors doesn't add up.
Housing prices drop, depleting average wealth and changing the market. The 'Wealth Effect" states that as your assets decrease in value, your spending will drop.
People's actual response? "Meh."
Commodity #2
Gas prices rise, causing the cost of everything else (except houses) to sky.
Also, CNN devotes a new section to it's site referred to as 'pain at the pump' with articles like 'viewers sound off,' "How long do you have to work to fill your gas tank?" and "Coping with high gas prices." Even Congress vows to fleece the fleecers.
People's actual response? Stop driving - 11 billion fewer miles were driven in March alone while Amtrak's May ridership rose 12.3 percent! - and dump the SUV.
See? All commodities don't act the same. Housing issues can be managed, while transportation costs, not so much. Making guesstimates about oil and gas prices based on housing economic factors doesn't add up.
posted by Jane Bellwether @ 10:37 AM
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