April 21, 2006 -- Few people, including the business press, seem to agree that the economy is still rolling along. Consumer sentiment is up significantly since October. The unemployment rate is down to 4.7%. We're adding an average of more than 70,000 net new businesses per month. The employed civilian workforce has never been larger. What's to worry about? When economies grow and change, there's always something negative to write about. Free economies are always shifting scarce resources to their place of best perceived return. Positive news is never good news, it seems. That brings us to our latest economic paradox.

The trade deficit narrowed, which was hailed in the press as a major achievement, but is actually a sign that the economy is slowing down. Oil prices are, of course, headed up, but we've been near this level recently. What has been odd is that oil supplies are abundant, so the run-up tends to be associated with tensions with Iran. The real problem has been gas prices. Not covered well in the media is the extra spike in prices caused by a bungled switch from MTBE additives to ethanol that will take some time to play out. Whatever the case, higher oil prices are primarily occurring because non-U.S. economies are starting to get stronger. Corporations that have not planned on higher energy costs will still work to control discretionary spending and could pull plans for advertising and promotions at a moment's notice.

Just remember this: $140 is the inflation- and productivity- adjusted price for oil that gets us back to 1970s oil embargo levels; $5.80 does the same for gasoline. We're not even close and probably won't get there, but be sure you have plans just in case. We may reach the inflation-only adjusted prices of around $3.25 a gallon for gas and $90 a barrel for oil. The same concerns are there for commodities, notably gold. Strangely, $600 is considered a 25-year high, but if they just go back one more year to a 26-year high, it would be more than $800. Adjusting for inflation, that would be more than a $2,000 gold price in today's dollars. Things are not what they seem. The only prices that seem to matter are the ones you paid in your most recent purchase.