During the recent run-up in gas prices, there are persistant stories
about how gas doesn't count as much now as in the 1970's. The idea
being that the US economy is more "diversified" now and gasoline just
isn't the same as in the 1970's.
But consider:
If gasloine prices today where adjusted for inflation!
Gas would be selling for about $2.90 per gallon! In other words you
gotta compare apples to apples here. In truth, gas is much much
cheaper now than it ever was in the 1970's, so we can not say that
it's a LESSER PART of the total economy USING CURRENT DOLLAR PRICING.
The point:
WELL, WHEN GASOLINE HITS $2.90 PER GALLON, THEN AND ONLY THEN WILL WE SEE HOW IT EFFECTS THE ECONOMY!
THEN AND ONLY THEN CAN WE SAY; "GAS DOESN'T COUNT AS MUCH TODAY AS BACK IN THE 70'S!"
MY HUNCH IS THAT GAS AT AN INFLATION ADJUSTED $2.90 WOULD HAVE
EXACTLY THE SAME EFFECT ON TODAY'S ECONOMY AS THAT EQUALIZED PRICE LEVEL HAD ON THE 1970'S ECONOMY.
The notion that, GAS DOESN'T COUNT AS MUCH TODAY, is just another big lie!
But, God help us if this theory is ever PUT TO THE REAL TEST!
