We mistook an energy shock for a financial crisis
Posted by Max Dunn Sun, 07 Mar 2010 05:52:00 GMT
I have often thought that the recession was really caused by the high price of oil and not by subprime mortgages. However, I haven’t seen any credible source to back this up until I read a post by Jeff Rubin today called: We’re all PIGS now.
Rubin worked for nearly 20 years as the chief economist of CIBC World Markets and here is what he believes:
It wasn’t subprime mortgages but triple-digit oil prices that brought down the world economy. And unless that economy started to wean itself off an ever-depleting supply of affordable oil, there would be other recessions to follow as economic recoveries would simply push oil prices right back into triple-digit range.
While I took exception with a lot of what Rubin said in Why Your World is About to Get a Whole Lot Smaller, here he is in the territory he knows best – economics – and I think his conclusion that record oil prices caused the recession is right on the money.