Better Days Are Ahead for the U.S. Economy

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Better Days Are Ahead for the U.S. Economy

The meaning of economic data, like beauty, lies in the eye of the beholder. That's the only way to explain how different people can look at the same numbers and reach completely opposite conclusions about the health of the U.S. economy.

Let's begin with the pessimistic view, which is best expressed by Michael Snyder, author of The Beginning of the End1 and writer of The Economic Collapse2 blog. According to Snyder, the drop in the price of oil during the second half of 2014 is a harbinger of doom.

As he writes, "There has only been one other time in history when the price of oil has crashed by more than $40 in less than six months. The last time this happened was during the second half of 2008, and the beginning of that oil price crash preceded the great financial collapse that happened later that year by several months.  Well, now it is happening again, but this time the stakes are even higher.  When the price of oil falls dramatically, that is a sign that economic activity is slowing down."

Certainly, low oil prices are bad news for the energy industry. As Bloomberg reported in early January, Halliburton, which is the global leader in providing fracking services to oil companies, plans to lay off 1,000 employees,3 while shale drilling company Continental Resources cut its 2015 budget from $4.6 billion to $2.9 billion4 as oil prices plunged below its $80 a barrel forecast to less than $50.

It's certainly bad news for the economies of countries that rely on oil exports. According to Bloomberg, with the exception of Iran, in 2015 OPEC members will earn their lowest revenues from exports in a decade. The U.S. Energy Information Administration predicts that OPEC's overseas crude shipments will plunge from $703 billion in 2014 to $446 billion this year.5

Russia, which is the world's second-largest exporter of crude, derived more than two-thirds of its export revenue in 2013 from oil and natural gas. Low oil prices have pummeled the Russian ruble to an all-time low. Finance Minister Anton Siluanov estimates that if oil is priced at $60, Russia's economy will shrink by 4 percent in 2015. In preparation for hard times, Siluanov is calling for a 10 percent cut on all spending other than defense.6

So cheap oil is bad news for the economies of countries like Russia, Saudi Arabia, Kuwait, Qatar, and Venezuela, which depend heavily on oil exports...

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