No, high energy costs did not collapse the economy. Far from it. This caused enormous pain to people struggling to get by, but no effect on wall street or the FIRE economy (Financial, and Real Estate), which is where the collapse is taking place. Finance = collapse of Bear Stearns and other banks. Insurance = collapse of AIG. Real Estate = collapse of housing bubble. That is your culprit, NOT oil prices.
High oil prices were an effect, not a cause, in the economy. When the housing bubble collapsed, the hedge funds and the other speculators needed a new place to play. Don’t expect the economy to be all better now that oil is at $70/barrel.
You need to study about the liquidity crisis and how the US government tried to inflate one asset bubble after another in a futile attempt to pretend the economy was strong. Our debt-driven economy was never strong as it appeared to be and an enormous amount of wealth in the economy was just pretend wealth, it was funny money.
Say you and John Doe buy eachother’s home. It’s just a title transfer, isn’t it. If you sold your home to John Doe for $1 BILLION, and John sells his house to you for $1 BILLION, does that make both your homes really worth $1 BILLION? I mean, you both have receipts that said you sold your home for a billion dollars.
Saying something is worth more than it’s true value on the open market doesn’t make it so. That was the housing bubble. But instead of a billion dollars, houses were only going for double or so what their true value was worth against current incomes and rents.
The collapse of the credit bubble in the form of the housing crash and related assets and securities are what caused this economic collapse. Expensive oil had nothing to do with it and was nothing but a side effect of collapsing house prices.
Recall that the price of oil started shooting skyward only after the price of houses started collapsing. Oil followed housing, not the other way around. The economic crash followed housing, not oil.
The energy bubble began in late 2004 and really got a head of steam in 2005. Remember Katrina (Aug. 29, 2005)? Oil had been skyrocketing way before that, pushing the price per barrel from $30 to $70.....
THAT was long before housing collapsed... and in fact contributed to the housing crash as vast resources had to be funnelled into expensive commodities rather than (at that point) thin margin real estate investments.
If this credit crisis was caused by the US housing bubble burst, then explain why Pakistan is near default?
Why did Britain have to pump untold billions into IT'S banking system.
What, was Pakistan long on Bear Sterns. Did Britain banks have a 90% stake in Fannie Mae and Freddie Mac?
Multiple countries around the world are in financial and credit shock, and much of it cause by the instant quadrupling of ommodity prices.
Now that commodity prices of plummitted, the economies around the world will slowly begin to build.
It's that simple.
Just heard Russia's economy is near default and about to collapse.
Didn't realize the US treasury was also in the habit of purposely inflating Russian housing just to prop up their economy also.
Uruguay is in default, as are most Latin American countries. Does Uruguay also invest heavily in the US housing market??
The common denominator between nearly ALL those countries in dire financial straights (and there are dozens) is they are oil IMPORTERS.... as most exporting countries are still living high on the hog.
The quadrupling of oil and eneregy just happened to coincide with a time when many businesses were leveredged to the max -- NOT JUST American companies but all over the world.
Did the American financial leaders drop the ball too? You bet.
But had the price of a barrel of oil not spiked from $30 to $150, the US and world economy would still be plodding along in relatively good shape.
In debt.... yes, but in good shape.
Like Alan Greenspan said, "Liquidity in the marketplace is just another name for confidence in the marketplace."
People lost confidence (and froze liquidity) when energy quadrupled between 2005 and 2008.
Now that energy is back down, confidence will again return to the marketplace.
It's as natural as the incoming and outgoing tides...
Again, call me partisan... but this mess can and should be laid at the feet of the "No Drill" Democrats who refused to allow the US economy to have access to the very resources we needed to thrive.