by Dennis Liu

Created on: May 02, 2008

A man from the local electric utility company came to a family's house to turn off the electricity and gas because the family failed to pay their utility bills. As he notified the family that he would turn off the electricity and the cooking gas, the woman in the house said, "Please let me finish cooking dinner for my seven children." The man came in to see if she was lying, and he noticed that they were cooking their pet dog. This situation did not occur in some poor country in Asia or in Africa, but it happened in the U.S. during the great depression in the 1930s. Are we heading to a global depression? What will the economic forecast be like for 2008? All the signs such as high food prices and high cost of oil show that the world is heading towards not only a recession but also a global wide depression.

There are several reasons for high food prices, but the outcome is devastating. The majority of people living in developing countries spend the majority of their income on food, so just a slight increase in price could affect them. With the 2007-2008 food crises, it has compounded the problem for many living off only with a few dollars a day.
As the cost of food is taking up the majority of people's income living in developing countries, fewer have any dispensable incomes remaining.

This rise in cost is also affecting developed countries, where individuals have to budget for the high cost of food. Inflation is often the result of economic growth, but this situation will lead to stagflation, which results with the economy having inflation but stagnant economic growth. If the price of food continues to increase there will be more riots, leading to a devastation of the economies of developing countries.

Almost every country depends on oil, yet the high cost of oil with definitely stunt economic growth. Economists consider the demand for food and oil are inelastic, which means that the demand is more of a necessity than want. It surely does not seem that the cost of oil will ever come down as the supply seems to be diminishing and the demand is increasing, especially with the economic development of China and India. Just as the cost of food is taking up a larger budget of many families around the world, oil is also taking up a larger budget.

Dispensable income with many other factors leads to economic growth. Yet, when cost of food and oil continues on increasing, the economic forecast of the year 2008 looks very dim. Not only does the year 2008 looks dim, but the coming of the next few years. If the cost never decreases, then an economic depression will be unavoidable.

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