Originally Posted by
KC10 FATboy
Nobody would argue that speculation wasn't a problem, but it was only part of it.
People speculated that as the price went up and people would continue to drive --- that is until a breaking point was reached. Well, we hit that point and demand dropped sharply. Because of the strain high oil prices put on the markets, economies worldwide failed and/or are failing.
Had the US been producing its own oil and flooded the market when the speculators tried to get the price up, the price of oil would have gone back down.
But don't worry, the likely next administration isn't very oil friendly, so, watch for oil to go back up as the markets stabilize and recover and as a result demand goes back up.
-Fatty
Really? So, the downturn in the economy was because of oil and not because of government intervention in the free market pushing lenders to offer loans to people who did not have the ability or the track record to repay those loans? And then investors all over the world bought up those packaged loans, and when it became clear that the investments were bad, there was not enough transparency in the system for anyone to know what institutions were invested in, so then no one could tell which institutions were "safe" to loan money to?
Oil played a part in the downturn, but only a part. Take a look at the regulatory changes to the Community Reinvestment Act in 1995 -- that strengthening of the CRA encouraged a loosening of lending standards throughout the banking industry, and in my view led directly to this crisis. And once it was done, no one could stop it because if they tried to weaken the CRA, they would be attacked as "stopping poor people from achieving the American Dream".
Apparently, the American Dream means owning a house you don't have the resources to afford. I guess I missed that day in civics class.
More on the CRA:
http://mises.org/story/2963#