This one is too good to pass up. Originally posted to The Schork Report, I ripped the graph from the Financial Times (here).
So, what we see here is an important relationship and trend. As the price of energy (not just gasoline) rises, the average Joe loses an ever greater portion of their income because energy is not like other disposable purchases… We need energy to survive. Hence, when energy prices go up, we have to cut spending somewhere else (unless, of course, our wages rise – which hasn’t happened – or we borrow against current wealth or future earnings. Are you ready for a third or fourth mortgage? Are you itching to pay 30% penalty charged by the credit card companies?).
As purchases for non-energy goods and services decline, someone else’s income either goes down, or there are simply fewer people required to provide these goods and services and unemployment goes up. Either way, the economy takes a hit!
Enjoy the graph.