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Gas prices are predicted to be $5 by summertime, will these prices hurt the economy even more?

I was wondering, would gas prices being up to $5 hurt the economy more? The reason I was wondering this is because with gas prices so high, it might decrease the number of people going on vacation since it would be extremely expensive to pay for gas, so would this in turn hurt the economy since some places that depend on tourism/vacations would not have as high an income.

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    Mar 3 2011: According to some economists, such as Jeff Rubin, every major recession was caused by an oil shock. The 2008 financial crisis, is no different in his view. His argument is supported by the fact that recession begun late in 2007 in several countries before the US dipped into recession. Thus, high oil prices were the cause of the crisis, and the housing melt down was only a symptom.

    So to get back to your question, yes, rising oil prices, if prolonged, will definitely cause damage to economy.
    For instance, think about all the goods that are being moved from China to US, all the flowers from Kenya that are flown by airplanes to Europe, as you mentioned traveling, and most importantly food which is derivative of oil. Oil goes up, the costs for the listed above goes up, people have less income to spend, and voila, recession!
    • Mar 4 2011: Isn't recession caused by inflation?
    • Mar 4 2011: Jeff Rubin is not "some economists". He has been playing the same oil-shocks-cause-recessions song for years, and since oil prices fluctuate and the economy fluctuates, it is very simple to show an apparent link between them.Inflation (a general increase in costs) is caused by one thing and one thing alone: governments printing money. (They don't actually 'print' these days, they 'quantitatively ease'.) More money chasing the same goods and services means people are prepared to pay more for the same thing, so prices go up. A general increase in the cost of living would not be possible if the amount of money in circulation remained the same. Under that scenario, if one thing went up in price, something else would HAVE to come down in response. (The very word "inflation" was originally used by economists in the context of "inflation of the money supply". That caused rising prices, and the media, ever ignorant of anything to do with economics, promptly started labelling price increases as "inflation".)If the US government continues to flood the world with US dollars on a scale never before seen in history, then there will be increases in the cost of living such as you never imagined in your wildest nightmares. Oil prices will, indeed, go up, but so will the price of everything else, whether dependent on oil or not. But what will really be happening is that the US dollar will be regarded with less and less favour, and so will buy less and less. A Big Mac will still be a Big Mac, but you'll need a lot more dollars to buy one.

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