Comment 82714

By A Smith (anonymous) | Posted November 09, 2012 at 19:06:01 in reply to Comment 82702

>> In short, I was wrong about how much resilience the economy has to high oil prices: we're actually in even worse shape than I thought

The real U.S. economy is actually in great shape, if you assume that most people buy homes to live in, rather than flip. Since 1983, the BLS has omitted house prices from the CPI, with the assumption that homes are now better classified as investments, rather than consumption goods.

However, for all practical purposes, most people buy homes to live in, not to trade.

If we make that assumption, that homes are consumer goods, this is what U.S. real GDP looks like...

As you can see, high oil prices have had very little effect on real GDP, as measured by real market prices.

Keep in mind that bankers don't like it when home prices fall, because that means smaller mortgages. As a result, they will keep selling the idea that rising home prices are a good thing (strong economy), not a bad thing (rising household debt).

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