Economy in the Toilet: What you should know about keeping yourself dry

So you keep hearing about the economy, and about the terrible recession that's coming like an impending doom, and something about a "stimulus package," which you're not quite sure about and even less sure that your kids should be hearing about it on the evening news. You're concerned about the problem, wondering if you're going to lose your job, wondering if you're going to have to live in a box like your Granddad was always telling you about, and you're even more freaked that you might have to stop your weekly Chinese run or stop buying those bobble-head dolls you know your wife hates.

Everyone's running around panicked already, and you kind of think that you should too, but you really don't like exercise, running even less, and besides, your cardiologist warned you that stress was bad for your blood pressure, not to mention your ulcers, so you're really looking for a reason so you don't have to worry all that much.

Look no further! This guide will tell you all you need to know in a fun, easy to understand Question and Answer format!

SO, OMG, I HEAR THE ECONOMY'S BAD?!?
That depends on your definition of bad, actually.

BUT WE'RE IN A RECESSION??
Technically, yes.

THEN ISN'T THE ECONOMY BAD?!!
No. A recession only means that the economy is receding, or going down. It's completely normal.

REALLY?
Yes. Think of the economy like a woman's mood. There are high times, there are low times, but it all about balances out in the end.

...THAT'S A WEIRD METAPHOR.
Thank you. I try.

WHY DO PEOPLE THINK THE ECONOMY IS RECEDING?
All the data supports it. The housing market is collapsing, unemployment is going up, the country's GDP is less than it was, inflation is high-

OKAY OKAY. BUT WHY IS ALL THAT HAPPENING?
Well, just like a woman's mood, different factors can effect the economy in different ways. Like housing.

HOUSING?
...yes, housing. That's what I just said.

WHAT'S GOING ON WITH HOUSING?
Firms exchanged long-term stability for short-term profits through unwarranted loans.

... ...
Banks were loaning out too much money that they weren't ever going to get back.

OH.
Yeah.

CAN YOU EXPLAIN THAT TO ME IN GREATER DETAIL, POSSIBLY WITH A HELPFUL DIAGRAM?
...

As it worked, the banks would loan someone who made about $60,000 a year $450,000 to buy a house that they couldn't afford. The banks would then pass the loan around for a bit like hot potato, convincing each other that this was a great deal because they could get the $450,000 initial investment and tons of interest on it so they should buy this loan from them for $500,000. Eventually, though, the person with the loan would figure out that they could barely afford the interest payments, let alone start to pay off the loan, and then they defaulted on the loan. The bank would foreclose, the guy would go off and buy a different house, and the bank would be left with a $430,000 debt in the form of a big house no one wanted to buy.

WOW. THAT'S SMART. ONLY NOT.
That's business for you.

SO THE HOUSING MARKET IS WHY THE ECONOMY'S BAD?
No. The housing market only accounts for 5.5% of the market, max. The main factor in the current recession is oil.

OIL?
Yes, oil.

WHY OIL?
High oil costs spike prices of everything. It costs people more to make things, more to ship them, more for people to drive and buy the things, etc etc etc. Eventually, all those costs add up, and people start to cut back on what they spend.

IS THAT BAD?
It is for the economy. When people cut back on what they spend, producers sell less things, so they make less, and then they lay off people because they're making less, who then in turn spend less because they don't have as much money, perpetuating the entire cycle as it spirals into the abyss.

WOW. THAT SUCKS.
Yes, it does.

WHY IS OIL SUCH A HUGE PROBLEM?
Well, the cost of crude oil is currently about $95 a barrel, where as in 1991, it was about $20.

...OH MY GOD.
Yeah. Oil's getting pretty expensive.

WHY?
Oil's a limited resource, we're running out of it, more industrializing countries increase demand, and the situation in the Middle East.

...THE MIDDLE EAST?
Yes. Currently, the situation in the Middle East is viewed as Very Unstable, especially by Middle Eastern countries, making them raise the oil prices drastically.

...I DON'T THINK I WANT TO HEAR WHY THE MIDDLE EAST SUDDENLY THINKS IT'S UNSTABLE WHEN THEY'VE BEEN BLOWING THEMSELVES UP FOR YEARS AND YEARS
Oh, really? It's really very simple. And it has nothing to do with Islamic conflicts or suicide attacks.

NO NO NO DON'T TELL ME-
Iraq.

NOOOOOOOOOOO
Sorry, but the facts support it. Ever since the Iraqi war started, the price of oil has spiked, going from about $30 a barrel to the prices we see now. In addition, the Iraqi was is causing such huge deficits and superfluous spending that the government can't invest in the private sector to give the economy a boost.

BUT THE GOVERNMENT'S HELPING US, ISN'T IT?! WHAT ABOUT THAT STIMULUS PACKAGE? WHAT'S THAT?
The government stimulus package is intended to help boost the economy. People will receive tax rebates of $600 per tax-paying person, with an additional $300 for dependent children.

THE GOVERNMENT'S GIVING ME MONEY!! THAT HAS TO HELP, RIGHT?
Wrong.

WHY NOT?
The government is doing this on the premise that Americans will go out and spend this additional money on goods and things, thereby pumping more money into the economy.

WON'T THAT WORK?
If people go out and do that. However, people are more likely to use this 'bonus' to pay off their credit card debt, help put their child through college, or help build up the savings account again. If people do this, the stimulus package will be nice, but it won't help the economy at all.

THEN WHY ARE THEY DOING IT?
It's an election year, people are paying more attention, the government's getting mud slung at it by candidates, Bush is on his way out and wants people to like him and to leave a legacy, and giving out money is an easy way to make people happy. Think of giving a premenstrual woman chocolate.

...CAN YOU STOP IT WITH THAT METAPHOR?
If you insist.

SO, SHOULD I PANIC OR NOT?
No. The economy is very likely to sort itself out on its own. The average consumer's not going to be hugely affected by this recession, and most businesses are just waiting it out. The only people who are cutting jobs are the ones connected to the housing industry like banks and construction agencies, and that's because their entire system was built on empty promises and broken hope.

SO... THE ECONOMY'S NOT BAD?
Not really. It might seem like it, but there's really no reason to freak out until unemployment gets a lot higher. It was higher when Bill Clinton was in office way back when, so it's not all that bad at all. If you really want to help and you have extra cash, go out and buy everyone you know a gift that's made in the USA, not China, like a Happy Meal or something.

WOW. THANK YOU SO MUCH. I FEEL SO MUCH BETTER.
Thank you :D I'm glad I helped.

...BUT REALLY, THE END OF THE WORLD'S NOT COMING IN THE FORM OF A STOCK MARKET CRASH??
... I hate you. I really do.