Russia - the entire economy is built on natural resources/commodities. When those prices crash, the economy crashes. Putin was so busy taking all the money and building arms/funding Iran, Syria/rewarding his supporters that he forgot that prices that go up can also come down. Ditto for Chavez and Imadinnerjacket.
The reason the EU and the US are crashing in the bursting of the bubble in RE. When debt service can’t be sustained, prices fall. The US and EU economies are built on debt. Bad debt means failures at many levels. Energy was just one of the causes of debt unable to be serviced, as it started taking over a bigger part of the budget. Ditto with other commodities like food.
Debt is also the reason that the world economy has a long way to fall yet. Prices must deflate further, because prices can only reflect whether someone can afford to pay them.
The median price of a home has over the past century or so been 2.5x median income. In places like CA, the median price of a home in places was 9x median income - clearly unsustainable especially when recasts and resets of mortgages started to occur. Prices will need to revert to levels sustainable for the median income before deflation subsides. In the meantime, there’s a lot more job loss pain to occur, and thus more debt default, before this all ends.
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.