Lower gas prices and long-term interest rates, coupled with a tax stimulus package will help in 09′

23Dec08

We are currently in what we hope to be the tail-end of the longest recession we’ve seen in a quarter century. We’re still searching and waiting for answers to many of the problems we’ve recently faced, but it at least appears to be the problem solving stage as opposed to the discovery stage. So where do we go from here and what factors will help pull us out of this recession? Will lower gas prices and long term interest rates, coupled with a tax stimulus plan be the answer?

Well they may not necessarily be the answer to all of the problems we’re faced with today, but we can say with near certainty that they’re a helpful step in the right direction. With oil slipping all the way below $35 a barrel and under $2 a gallon in most parts of the country consumers may not run out and immediately flood the economy with these extra savings, but it certainly could help many stay afloat and will begin to take its positive effect on the overall economy as time goes on. For every $.01 drop in price at the pump, it’s the equivalent of pumping $1 billion back into consumer’s pockets on an annual basis. For every $1, that’s $100 Billion a year. Oil is at a 5 year low and the average gas price across the country has dropped over $3 a gallon! I’d say that’s a good step in the right direction, but those prices need to stay lower for a longer period of time than a couple months or even a few quarters.

How about the effect of lowering long-term interest rates? The Fed has cut the discount rate now from 1.25% all the way down to .5%, and home mortgage rates are at historical lows dropping below 5%. Again it is definitely a great step in the right direction, but this one needs even more time to really take effect on some of the current economic struggles we’re facing. Also, we need to find more structured ways to get these favorable lending opportunities into the hands of the people who really need them.

Both lower gas prices and long-term interest rates will eventually help stimulate the economy in many ways, but we have much larger problems to untangle for those to stand alone as the ultimate solutions. Will these helpful downward shifts stick around long enough to have a seriously positive impact? Only time will tell. If they do, coupled with Obama’s tax stimulus plan, we should be looking forward to a much brighter 2009.

Keep looking up and Happy Holidays!

Ron Sloy

Learn more about Ron Sloy.

Advertisements


One Response to “Lower gas prices and long-term interest rates, coupled with a tax stimulus package will help in 09′”

  1. Not that I’m totally impressed, but this is a lot more than I expected when I stumpled upon a link on Delicious telling that the info is quite decent. Thanks.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


%d bloggers like this: