Try to learn.

It’s not because of covid-19

> Oil prices fell through the floor in early trading Monday, tanking as much as 30% after Saudi Arabia slashed its crude prices for buyers. The kingdom is reportedly preparing to open the taps in an apparent retaliation for Russia's unwillingness to cut its own output.

But this isn’t bad news, firms and consumers face lower prices.

Lol

The stock market is temporary.

K.

It’s caused by a supply shock, not a demand shock.

The Great Depression was temporary

That’s a dishonest comparison, the stock market is merely reacting to an unexpected move.

It’s a short term thing, I.e a few days

Oh, but I thought supply chains were built to be immune to supply shocks?

That doesn’t make sense...

The supply chains are resistant to the shocks like coronavirus - that’s what I said.

It must be rough for Sid to wake up to the news each morning crying trying to figure out how he’s going to spin it so everything is fine lol

The oil price drop won’t effect firms, negatively.

That’s just an excuse. @Sophie

How could I negatively spin lower oil prices?

Unless those firms are involved in oil production.

Yeah, because an oil supply shock has never happened before...

Yes that’s true.

It has but not negatively.

As in a positive supply shock.

Stagflation?

I’m not referring to a rapid decrease in supply, I.e the ‘90 shock

I’m saying the current drop is only going to negatively effect the stock market for a moment. But consumers and businesses win, unless of course you’re an energy producer - but that isn’t the whole economy.

That’s not what happened in the 70s

The 70s is a totally different ballgame, it’s not the same as a large increase in supply now.

The 70s were the opposite, a negative supply shock.

So you’re saying there’s going to be a positive supply shock?

This is positive.

The price of oil declined due to an increase in supply.

The 70s was the opposite.

I get what you’re saying now. That could be good in the short run, but we’ll see in the long run

An increase in supply is normally beneficial for economies, unless you’re russia.

Since consumers and businesses face lower prices, I.e higher real income.

Yeah, but it can also create deflation, which can be less beneficial

Deflation isn’t harmful or harmless - it depends how it occurs.
Supply side deflation is a reduction in prices caused by a shift in production (i.e supply curve shifts out)
Demand side deflation is a reduction in prices caused by a reduction in demand, demand curve shifts in.

The latter can be harmful, the former however is not. What we’re seeing now is the supply side of deflation, this is pretty benign and to be welcomed

Have you learned about the lost decade yet?

Jw