Posts Tagged ‘economic recession’

While there’s obviously no guarantee that this recession will follow the same path as ones that have come before, here’s a very interesting look at how this downturn compares to some of the biggest of the last 80 years.

The chart above, created by dshort.com and updated on Feb. 25, gives a very compelling look at the stock-market path of the current economic recession compared to those of the Great Depression, the 1973 oil crisis, and the recession caused by the collapse of the technology bubble at the beginning of this century.

A lot of facts, figures and odd measurements (like the actual height of a stack of one billion dollar bills) have been thrown around since the start of the recession, but I find this chart a very tangible quantification of what’s really happening. Hopefully, you will too.

Do you find this chart illustrates the recession better than others you’ve seen? Does it help you put the recession in real terms?

Americans aren’t the only ones struggling with recessionary times and bank bailouts. British candy makers hope to soothe worried consumers with the ultimate comfort food ⎯ chocolate. The upscale British department store Selfridges has introduced a new chocolate candy called “Credit Crunch.”

Brits consume more candy weekly ⎯ an average 8 ounces ⎯ than anyone else in the world. (Americans average 5.6 ounces weekly.) Presumably, this might help to explain the Brits’ top world ranking for bad teeth, with annual dental care totaling $140 million, according to Time magazine.

The candy, made of chocolate and crunchy honeycomb, could cheer you up, even when your savings and investment account statements won’t.

If you had to come up with a snack or candy treat that describes the state of your current personal finances, what would you call it? Peppermint patsies, anyone?

The title question may seem ridiculous on the surface — we’re all seeing prices in our everyday lives go up. But is one of the factors in the current rise in prices our own fear and uncertainty? The two biggest price increases in the news these days are food and gas. Are food producers and fuel companies taking advantage of this headline-grabbing information and increasing prices because in part because we expect things to cost more?

To answer this question, let’s look at some real data on exactly how much prices are going up. The Consumer Price Index (the U.S. Consumer Price Index is a time series measure of the price level of consumer goods and services, or basically — how far does your dollar go in the current economic environment) shows:

3-month comparison:

• Energy costs: 28.2% increase in the compound annual rate for the 3 months ended May 2008
• Food costs: 6.2% increase in the compound annual rate for the 3 months ended May 2008

1-year comparison:

• Energy costs: 17.4% increase in the compound annual rate for the 12 months ended May 2008
• Food costs: 5.1% increase in the compound annual rate for the 12 months ended May 2008

So for food, 5% over last year — not so bad, but energy, 17.4 % — ouch! Now let’s take a 10-year look:

• CPI food in May 1998: 160.3
• CPI Food in May 2008: 211.918

• CPI Fuel and Utilities May 1998 129.3
• CPI Fuel and Utilities May 2008 222.094

Over 10 years, food is up 25%, fuel 75%, again — ouch! However, the spike in fuel costs has happened all in the last year, and, many people feel, is due in large part to speculation. Will this trend continue? Oil will probably not go back down to $50/barrel, but the recent run-up in prices looks suspiciously like a bubble to me.

Panic in the stock market has reared its ugly head several times in the past — 1928, 1987, 2001 — and was always preceded by what Fed Chairman Greenspan famously labeled “irrational exuberance” in the stock markets. The current climate was definitely the irrationality of the real estate market. I submit that as fast as the real estate market zoomed inexplicably upwards, a frenzied “the sky is falling” climate can drive prices in an equally irrational direction.