Economic Gurus or Lemmings

Every day I hear predictions about which way the economy is heading. The internet and the airwaves are filled with "experts" who tell us in great detail what just happened. Most of them also tell us what is coming next. Indeed, I used to find it funny that every morning at 9:30 no one knew what would happen in the market that day, but at 4:00 we would hear reports telling us not only what the market did, but also why. If these "experts" really knew why, they would be investing themselves rather than making their living by reporting. Many economic predictions seem as flawed as those about the daily performance of the market. It often seems that most of the so called experts can only predict that things will continue as they have been going. These folks seem more like lemmings following each other than actual experts.

This morning I hear a report which illustrates this phenomenon. According to the business reporter from CBS News, many "experts" (his word) now think that higher gasoline prices will not hurt the economy like they have in the past since we have already seen $4 gas before (right before the crash) and since the economy is growing rather than contracting as it was last time gas was so high. This is nonsense. Each dollar increase in the cost of oil takes about $5 billion out of the pockets of American consumers and more than half of that total leaves the economy completely. That means that the rise from $80 per barrel of oil to $110 took far more from consumers than the much touted payroll tax holiday gave them. It seems safe to say that if the payroll tax holiday was supposed to push the economy forward (according to these same experts), the rise in oil prices will hold the economy back. Further, as gasoline prices hit new highs, folks get sticker shock. They not only lose the portion of their income which now must be devoted to fuel costs, but they start to fear for the future of the economy and hold back on other purchases. This has happened over and over in our economic history. In other words, these "experts" are just wrong.