The Oil Drum | Economy grows at slowest pace in 3 years

124 comments on Economy grows at slowest pace in 3 years

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Leanan on January 28, 2006 - 5:01pm

The Clinton boom was an oddity. Ordinarily, expansions don't last anywhere near that long. That's probably why so many people thought it really was a "new economy." Typically, cycles are much shorter than that.

As for why the economy has held up so well...I've heard two theories, both of which seem reasonable. One is that the rise in price was gradual, not sudden like it was the last time we were in this territory. So the economy had time to adjust.

The other is that there's a difference between a supply shock and a demand shock. According to this theory, what causes recessions are supply shocks - when suddenly, there's less oil than the economy is accustomed to. What we've had until recently has been a demand shock - the world economy growing so fast that supply can't keep up with demand. Since this is a result of healthy growth, it doesn't cause recession.

According to the latter theory, Katrina could be trouble, because that actually reduced supply.

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Oil CEO on January 28, 2006 - 5:07pm

Roger that. Good points.

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wkwillis on January 30, 2006 - 7:20am

I've noticed that the Fed has for the last twenty five years cut interest rates when a Republican president is going for reelection and afterwards, and raised them just before a Democrat is going for reelection and afterwards.
Despite this, or perhaps because of this, the economy does better under Democrats.
Is the Fed trying to get Republicans in the White House and it is actually aiding Democrats as a policy? Because it doesn't know what it's doing, or because it does?

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124 comments on Economy grows at slowest pace in 3 years

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