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.Is the reason for economic recession our mortgage crisis, or exponential rise in price of oil?
You forgot the WAR and the idiot who led us down this path!
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.
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).
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