http://www.nypost.com/seven/04092009/posto...3630.htm?page=0

Cato's Alan Reynolds makes the case that the current recession started abroad, not as a result of what was going on in housing or the banking industry but for the same old reason that nearly every post-WWII recession has occured:

In 1983, economist James Hamilton of the University of California at San Diego showed that "all but one of the US recessions since World War Two have been preceded, typically with a lag of around three-fourths of a year, by a dramatic increase in the price of crude petroleum." The years 1946 to 2007 saw 10 dramatic spikes in the price of oil -- each of which was soon followed by recession.

In The Financial Times on Jan. 3, 2008, I therefore suggested, "The US economy is likely to slip into recession because of higher energy costs alone, regardless of what the Fed does."

In a new paper at cato.org, "Financial Crisis and Public Policy," Jagadeesh Gokhale notes that the prolonged decline in exurban housing construction that began in early 2006 was a logical response to rising prices of oil and gasoline at that time. So was the equally prolonged decline in sales of gas-guzzling vehicles. And the US/UK financial crises in the fall of 2008 were likewise as much a consequence of recession as the cause: Recessions turn good loans into bad.

The recession began in late 2007 or early 2008 in many countries, with the United States one of the least affected. Countries with the deepest recessions have no believable connection to US housing or banking problems.

The truth is much simpler: There is no way the oil-importing economies could have kept humming along with oil prices of $100 a barrel, much less $145. Like nearly every other recession of the postwar period, this one was triggered by a literally unbearable increase in the price of oil.

Good point, higher energy prices are part of what pushed so many barely scraping by into foreclosure.

For years people used to say that $100 oil would kill the economy. $100 oil came and went and it appeared to not have any effect until it hit nearly $150. In hindsight, Reynold's analysis contends that in fact $100 oil did pretty much what folks had always said it would.

Oil did not spike on its own. Crude is denominated in US dollars, when the Fed increased the money supply to massive previously unimagined levels the price took off. Add in Katrina, the Iraq war, and a general energy bubble and you have $150 oil.

There is quite literally a direct inverse correlation between the two.

Space blaming Bush?

:blink:

Mostly the Fed but yeah........I have always blamed Bush for being a spend happy fiscal liberal.

like Clinton?

more like carter i would say...

Oil and other commodities became a hedge, yes. But but prices were driven up by demand and priced-in ME risk premiums since 2003.

An ugly mess all the way around...