Call me the eternal optimist, but there’s certainly a silver lining to the current economic downturn?gas prices.
The woes of Wall Street have cut oil prices by more than half since their high in July. Gas prices across the nation are approaching $2 per gallon for the first time in two years. Of course, I can remember when we were all going to slit our wrists because gas prices were threatening to rise above $2. What a difference a little $4 per gallon perspective makes.
Our current gas price euphoria is primarily psychological. So is much of what’s been happening on Wall Street. The difference is what’s happening at the pump stands to have a much greater impact on the real economy than does the bailout, the bankruptcies or anything else going on in the financial district of New York.
Most of us now own stock but most of us own it in the form of retirement funds. Unless you’re retiring today, you’re not going to be affected. Even if you are retiring today, you’re not going to take out your entire retirement fund today so you still have years to wait and watch your investments recover.
Don’t get me wrong. I’ve had statement shock just like everyone else. I’ve even set some of my financial statements aside, unopened, because I was afraid of what was inside. That might not be a bad way to go. I made my investment selections several years ago for the long term. I understood the risks I was taking and I understood I was in it for the long haul. If that’s the case, it does me no good to see how poorly my investments might be doing right now. If I have a solid plan I need to stick to it. I’m still a couple of decades away from retirement. There’s nothing I can do about it now and there’s probably nothing I should do about it now.
What has an immediate impact on our lives is the price of gasoline. Psychologically, we’re getting a steal with prices down around $2 per gallon. That should translate into a better feeling about Christmas. People were feeling pinched by $80 or $100 fill-ups. Now that those fill-ups are more like $40 or $50, psychologically, we feel like we have a little more breathing room and a lot more money. That should mean more gift-buying this Christmas. That is, if we can stay away from the doom-and-gloom coming out of our televisions.
The textbook definition of a recession is two consecutive quarters of a contracting economy. We just had one, the third quarter ending September, although it was a milder contraction than was expected. If the gas prices continue to tumble then we may not see a contraction in the fourth quarter, thus dodging a recession. Of course, we will see joblessness increase and although better than 90 percent of us will still have jobs, seeing others lose theirs will frighten us. The question is, how much? Will we be so petrified that we batten down the hatches and brace ourselves for the worst or will we get out there and do what’s necessary to keep the economy moving?
President Bush was criticized during the economic slowdown following 9/11 for advising people to get out there and “buy something.” Despite the naysayers, he was exactly right. I’ve started to see it already. People with good jobs and plenty of expendable income are starting to get too scared to buy. It’s not Wall Street that will get us. It’s our own fear.
Phil Valentine is an author and nationally syndicated radio talk show host with Westwood One. For more of his commentary and articles, visit philvalentine.com.
