Sounds right.
I was making a point to a poster that this credit crunch was launched by the quadrupling of energy prices in late 2004 thru 2007.
Oil jumped from $30 to $147 per barrel, and aluminum, copper, zinz, and all commodities spiked out of sight.
It wasn't like all of a sudden millions of people defaulted on their homes for no reason. (The poster blamed Wall Street ONLY)
Transportation, high heating, high food, etc around the world caused global businesses and homeowners to simply slam on the brakes, which caused a domino effect.
I am positive that if oil had stayed around $30 the past four years, the economy would be growing normally, at a few % a year.
My edivence includes the fact that Pakistan is near default. Pakistan had nothing to do with Fannie Mae or Bear Sterns.
Why did Britain have to take over THEIR banks and insurance co's.
Why is the russian (the one net oil exporter in the bunch) banking system near collapse. Not to mention nearly all Latin American countries?
The energy began this mess. Housing collapse was the result.
I still think you put the cart before the horse. If you look at the data, housing in CA and FL and NV started to go bad (default rates rising) because subprime started recasting and resetting in 2005-2006. The Fed pumped in more liquidity to offset bank capital losses, which the banks like Goldman Sachs and Merrill and JP Morgan used to make speculative plays in commodities to goose their returns.
You can blame the Fed. Commodity price increases were a result of too much liquidity, which was a result of the Fed’s action to shore up banks who just hid their losses in Level 3 “assets”.
So no, energy was NOT the catalyst - housing was.
Not for no reason. Housing defaults are coming mostly from those with adjustable mortgages. What happened was, the Fed raised the Funds rate to 5.75%. This ended the easy money needed to keep growing the housing bubble. At the same time, adjustable mortgages were beginning to reset and the value they were resetting to were tied to the Fed Funds rate. In the meantime, the speculators saw the housing bubble petering out and moved from housing to commodities to try to catch the next bubble. You saw this move from a housing bubble to a commodities bubble and you are mis-diagnosing the effect -- higher energy prices -- for the cause, which is the collapse of the housing bubble. So while you think high energy costs were a cause of economic crisis, they were in fact an effect of the economic crisis.
Your theory is very interesting though. If you think high energy prices caused the collapse of housing, then what caused the high energy prices? The housing bubble was caused by a flood of easy money, both low interest rates and loose lending standards. Those structural changes created the housing bubble? In your mind, the energy bubble caused the collapse of house prices, banking and the economy. If that is your thinking, then what structural change occured to suddenly cause the energy bubble and higher oil prices? OPEC didn't cut back on production. Demand didn't suddenly outpace supply. I have identified structural changes that caused the housing bubble. Now your turn. What structural changes do you think caused the oil bubble? Bubbles don't "JUST" happen. Usually they follow some loosening of government policy that steers capital into a given direction, speculators jump in and then Suzi Soccer Mom and Joe Six Pack jump in to run it up to the moon. This happened with housing when the government slashed the Fed Funds rate and demanded that lenders give loans to everybody with a heartbeat, which they salivated at to get fees. How did this happen with oil? I'm dying to hear your explanation.