You give the President way too much credit for the economy. Didn't Bush support drilling for more oil to increase the supply and drop prices? Isn't the liberals who are opposed to drilling and increasing the supply in the name of the environment? Who really is trying to manipulate high oil prices? The liberals would love nothing more than to have high oil prices to drop usage and "save" ourselves from acts of environmental genocide and global warming. The world demand for crude went down, so the oil speculators would not give as much for a barrel of crude. As the speculators' expectations went down, so did the price of oil. It dropped pretty fast, because no one was willing to pay the price. The world demand dropped; the supply remanded the same, so prices dropped. It was not just oil prices. Commodities have dropped dramatically too, for the same reasons crude oil dropped. The middle east oil cartel dropped oil production trying to drop supply, but the demand was still dropping and so the prices continue to go down. When the supply drops enough or demand increases, prices will soon go up or stabilize. Supply needs to be balanced with demand to stabilize prices.
Yep - I believe in supply and demand. It is a very basic concept. The problem is government has to stick their nose in and tweak it. Subsidies are just one thing that can really mess it up. The Government props up certain sectors by giving them money to supplement their incomes from the sale of certain products. If left to demand, the prices would drop and some would go out of business. When the supply drops to a point of not supplying the demand, prices would increase, making more incentive to get back into it again. After a few cycles, it would stabilize, with a balanced amount of supply and demand. If the demand was never there, then the supply would be worthless and no one would be there to supply. But that is what it is all about. Demanding supply and supplying the demand. In certain cases there have been a supply and marketers have generated the demand. The demand and supply drives prices, if left alone.
The stock market is another prime example of supply and demand. When some one wants to sell off stocks, he must find some one to buy. If no one wants to buy at his selling price, he must lower the selling price until some one is willing to buy it. If you are looking to buy stock you must find some willing to sell it. It might take 5% more that the original owner paid for it, it may be 10%. It depends on how many people are willing to part with their stocks. If not many, then you have to keep raising the price you are willing to buy for to entice someone to sell. This drives stocks up. If you want to sell and can not find any one, you keep lowering your price until some one does buy it - driving down stock prices. When a stock gets to the point of no one willing to buy it - it becomes worthless. The company the stock belongs to goes out of business, because it does not have any value. There are factors that make stock worth more (demand) or less too, like stock dividends. If the stocks are giving no dividends for a long period of time, then it becomes worthless, because no one willing buy them - the business the stocks are tied to is losing money. When the assets of the company can not cover the business losses and the stock prices drop very low, there is nothing the company has to borrow against to keep going. Then you have no one wanting to buy that stock (invest) and the company will go belly up. Very simplified but it is supply and demand.
