Monday, May 10, 2004

Gas prices and the stock market

Let me see if I've got this straight.

Gas prices are going up because demand is up, reserves are down, and the base cost is up.

Because gas prices are going up (among other things), the feeling is that 'inflation is back'.

Because inflation is a bad thing, the cost of loans is expected to go up as an anti-inflationary measure.

Because the cost of loans is expected to go up, corporate profits are expected to go down.

Because corporate profits are expected to go down, people sell stocks now.

Because people sell stocks now, the value of the stock market goes down.

Because the value of the stock market goes down, the value of stocks, overall, goes down, and the net wealth of the country is less (barring direct and cost free transfers into other financial instruments).

Ok, I think I've got it.

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