Add It Up

JACKSON HOLE, Wyo. -- The table below illustrates an important but (apparently) not very popular truism.

Call the variable in the table anything you like -- a measure of economic activity (such as

gross domestic product

) or a broad price measure (such as the

consumer price index


Or even the cost of a particular commodity -- such as a barrel of oil. Pretend that oil prices shot to $26 in Period 9 from $18 in Period 1, but then plunged to $11 and stopped there just 15 periods later.

Such a price decrease would produce a year-over-year decline that maxed out at 52.2% in Period 24.

Pretend also that those increasingly bigger year-over-year declines in oil prices ended up chopping roughly 1.0% from the consumer price index in 1998.

Then suppose a buddy of yours -- perhaps one who's trying to sell you on the idea that the yield on the

30-year Treasury

will see 4.5% again before it sees 6.0% -- rings you up.

"Dude! How stoked am I about the inflation outlook?! Couldn't be better!"

To which you reply:

"Hmm. Help me out a minute. I'm looking at a table with a really simple example that shows you might want to revise the direction of your forecast. According to this thing, the math works such that oil prices don't even have to rise in order for them to begin taking back the help they've been giving the broad price measures. Matter of fact, this thing shows that, even if oil prices hold steady, their year-over-year pace of decline will decelerate to 8.3% in less than a year. The help to which you've grown so accustomed is disappearing -- and, if


can hold to the production cuts being tossed around, it'll happen even faster."

"Dude! Hello?! Oil prices ain't gonna rise. But, wait ... Shh!!"

(Four-second pause.)

"Sorry, dude! Had to scribble down a suh-weet stock tip I heard on


! Anyway. I just ain't buyin it, pal! Is this another one of those convoluted ideas you got from that loopy online economics moron?! That dude's whacked!"

"Listen. Remember how you used to think that net exports subtracted from GDP growth every single quarter because the U.S. runs a chronic trade deficit? Remember? Well, trust me on this one, too. And if that doesn't sit well, then keep in mind that


recently spelled out the same thing for a bunch of



"Yeah, well, lemme think about that one. For now, you wanna bet on


? Tell you what -- I'll give you a dozen to take the underdog. That'll teach you to mess with

The Cardinal


You get the point.

And keep in mind that similar thinking applies to growth, too. World GDP


fell to 1.8% last year from 3.3% in 1997 -- including a plunge in growth in Asian crisis countries to 0.1% from 8.0%.

So, those pointing out that Japanese GDP will grow "only" 0.8% this year (against a 2.8% decrease last year) or that world GDP will grow "only" 2.2% this year -- or that growth in Asian crisis countries will grow "only" 3.2% this year -- are missing the point entirely.

The point is that the worst hit is behind us.

Brazil? Bug on a windshield.

Side Dish


The sissiness of some constituents of the forecasting profession knows no lower bound. What the most ardent slowdown types do tell you is that bond yields won't move materially higher because price measures are kind and likely only to prove kinder; what they don't tell you is that they were promising the same thing back in October. Worse still, the most pathetic members of this lot are screaming slowdown even as they (a) double their first-quarter growth estimates and (b) remove their calls for second-half


easing veeeery quietly, hoping that no one will notice.

Do not listen to these people. You will end up every bit as miserable as they are.


Your correspondent wishes to sincerely thank the


basketball team for folding like a five-dollar tent. Ditto for the


. He also wishes to encourage all the


fans out there to keep thinking your conference is for real. As long as you keep doing that, the rest of us are happy to take the likes of




-- and your money.



Jean Williams


Larry O'Connell

? Give

Richie Phillips

a ring. You both have exceptionally promising futures as baseball umpires.

Best steak?

Still thumping.

Medium rare.


Medium well.

How Grampa likes it.