Is the reason for economic recession our mortgage crisis, or exponential rise in price of oil?

In contrast to the eminent mortgage crisis that our country is facing; the price of oil has risen from /barrel to nearly 0/barrel. The price of fuel affects a broader population than the bad loans and/or bad debt that media and government are focused on. It doesn’t help to be given only half of the reasons why we are getting poorer as a nation. Fuel prices drive up food prices, and everybody must eat. Not as many of us own a home "mortgage", and fewer of us actually own a bank.

8 Responses to “Is the reason for economic recession our mortgage crisis, or exponential rise in price of oil?”

  1. nothingconstant Says:

    I am in my senior year for an Economics degree. The first thing you learn is that no one really knows much about what is going on. They can crunch numbers and say employment 5% etc. but it call comes down to the sociology aspect that many economists neglect. It comes down to moral issues.. and it comes down to how much regulation should be imposed.. it comes down to how we decide to regulate newly formed credit markets…. the list goes on and on. Most importantly, it goes on the average person’s sentiment. Even Greenspan said that if he could predict people’s behaviors everything else would be easy.

    So what’s caused this? Everyone has heard of subprime mortgages. No one really hears about Credit Default Swaps which may end up being a bigger problem. A newly formed type of "insurance" that is not regulated and has seen scary numbers recently. It could be the megolithic spending in Iraq. Others would argue that we have gone through 5 or 6 years of an Iraqi war and the economy was doing fine. I argue that it takes a while for things to catch up and bite you in the butt. The spending is catching up to us. Others say that China will be the next superpower. They forget that Americans are the consumers. Maybe not with so much power as we once had but we still have an impact. We CONSUME China products and we drive up the cost of oil because we CONSUME so much of it. If we go down the drains, everyone struggles.

    I personally think it is because of new found credit markets that have lacked regulation. People like George Bush love to say "free market" but in the case of credit markets, free market certainly has not worked. People take too many risks and under-assess those risks. Furthermore, we bail out these bankers with interest rate cuts and incentives which create a moral hazard. It encourages imperfect behavior.

    You just have to realize that even though it seems like people know what they are talking about, most of it is fairly new. We have not had this global economy for long and we are inexperienced in dealing with sooo many things.

  2. Wounded Duck Says:

    You forgot the WAR and the idiot who led us down this path!

  3. anaise Says:

    Whatever "crisis" we experience is projected on whatever is affecting our economy. I believe its the relationship we severe with the country that produces the product. I also believe a "crisis" is created to allow big business to falter without blame and point it at the consumer so the media can keep its nose away from the real problem: big business creates problems by testing the market to see how much it will gain or lose. When the consumer falls victim to these tests, it becomes "our fault" because "we should have been more educated before we got ourselves into it". Not fair, I think since we had no say-so in creating the contracts(mortgage, credit, autos).

  4. mathmatucla Says:

    The mortgage crisis and credit crunch are both more damaging to the economy then the oil problem is. Inflation is helping to reduce that problem (imagine $100 oil in the days when being a billionaire was nearly impossible and meant being richer than Bill Gates.

    Against your oil arguements, banks affect a large group of people and a collapsed back wave is well more damaging then $100 oil. Economists are annoyed by high oil but shaken by large bank closures. When a bank reports its first loss ever, it is a large blow to the bank and sends a message. When it happens to several banks at once, a recession is started.

  5. | Acneguy Says:

    I think we are also seeing some signs of recovery from the Economic Recession. Of course, we have no idea of how long it will take to completely recover, but some say it’s going to be longer than for the other recessions in decades. I also scanned an article yesterday that said business owners need a new set of tactics to do well during recovery.

  6. Puzzlesolver Says:

    OK Lets take the problem apart and see where to begin. About three years ago, the banks,Freddie and Fanny were giving mortgages away at an alarming rate. True that somehow, the mortgage holders fit into some “requirement” of either assets or financial responsibility to repay those mortgages, but many were just barely getting by.

  7. Puzzlesolver Says:

    OK Lets take the problem apart and see where to begin. About three years ago, the banks,Freddie and Fanny were giving mortgages away at an alarming rate. True that somehow, the mortgage holders fit into some “requirement” of either assets or financial responsibility to repay those mortgages, but many were just barely getting by. What happens next is in dispute. Most would agree that sharp increases in oil prices (especially at the pump) led consumers to have a lack of funds for their bills paving the way to unpaid mortgages. After three months, banks will foreclose. As your spending cash starts to be depleted, you look to spend less on goods and services. this leads other industries (food restaurants,autos,appliances etc) to be put on hold until the “economy turns around” Consumer confidence will plummet as soon as there are questions in the stock market. When the stocks go down, so does the future of your 401K. Consumer confidence goes down further leading people to put off buying that new house or even minor repairs to the old one. Forget about replacing appliances, you might be furlowed tomorrow at you job! This leads manufactures to cut down inventories and lay off non-essentials and while you are at it,lets try to become more global and send the engineering and manufacturing over seas in order to capture a larger market share to beef up the bottom line. Will it work? Time will tell. Right now, our economy is poised to create new jobs through education. Colleges and universities are reaching out through on line courses and off campus courses to entice more students to join their establishments. As they do this, they are looking to expand their educators and staff;but the question is what are they producing? Pretty soon, we will be the best educated, non productive government gamers that money can buy.I say it is time to ween ourselves off the barrel and to higher tech jobs here in America that can be made into an infrastructure that will support it. Consumer confidence needs to turn around. If you can accomplish that ,the economy will take care of itself!

  8. Angela Says:

    the last quarter of 2009 seems promising as we have seen lots of signs of econic recovery against the massive economic recession. i hope that in 2010 all our economies would be back on track. recession really sucks.