[CAMWEST-discuss] Cause of 2008 recession
danny_hannan at yahoo.com
Fri Oct 21 00:55:18 EST 2011
Here is a quote from Bloomberg news
"Rifkin argues that record oil prices in 2008 pushing up the costs of everything from food to clothing rather than the collapse of Lehman Brothers Holdings Inc. was the main cause of the financial crisis. The global economy won’t return to its pre-crisis growth until it moves away from fossil fuels because rising oil prices will continually hold down expansion, he said." Jeremy Rifkin, a Wharton Business School professor.
Unfortunately there is no substitute for fossil fuels and especially for oil. While we can make electricity from renewable or nuclear sources even if more expensively than from fossil fuels, we need the fossil fuels to produce the materials; copper, steel, plastics etc to build the renewable and nuclear infrastructure. Modern transportation is impossible without oil. While electric vehicles are technically possible they are far more expensive in both financial and energy terms. Until we can send goods across the inter-net (don't hold your breath for that one), our global and national economy is heavily dependent on fossil fuels.
And the good news is that declining supply of oil is projected for 2012 and after 2014 by the US Energy Information Agency and global exports of coal are projected to be in decline early to mid this decade. Both putting upward pressure on prices.
However my view is that the 2008 recession was cause by a combination debt financed unsustainable growth that caused increased consumption of fossil fuels coinciding with global peak oil export and production pushing oil prices higher, The combination of that debt and high oil/fossil fuel prices caused the crash. The debt situation is in fact now worse, with profits being privatised and debts being nationalised, and the supply of fossil fuels is even more constrained.
As evidence I offer the comparison of global GDP to commodity prices. Commodity prices were at their lowest compared to global GDP in the late 1990s and either the global GDP has declined compared to commodity prices or the commodity prices have risen against global GDP since the late 1990s and at quite substantial rates well over 10% a year. From 2002 to 2008 oil averaged 61.8% increase per year against the US dollar. In real terms the world has been in an economic recession since the late 1990s
We are in for a very long bumpy ride.
danny_hannan at yahoo.com
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