It’s nice to see an author owning up to his work then using an aka to hack the results. Somewhat like Nic Xenophon in ethics.
http://forum.onlineopinion.com.au/user.asp?id=43478
We however don’t really disagree in principle on the what’s and whys of the cause of this economic mess that the world politicians still haven’t got a solution for.
I said the oil price jumping from 35 to 140 was the trigger, not all oil price spikes.
Something we can thank Alan Greenspan for btw
Greenspan’s view of supply and demand in oil is sobering. For him to believe that oil prices will stay high he has to be forecasting that demand in emerging economies like India and China will not slow.
In his CNN interview he said and I quote
“If Bush hadn’t invaded Iraq oil would be $160 a barrel now”
This immediately spiked the price of oil overnight by $20 and it proceeded to attempt to hit his magical $160 figure as speculators cashed in on “the god of economics” prediction.
This in my opinion the trigger for the collapse in the market... as you agrees because comme ci comme ca was the oil price trigger. The underpinning of the market to real estate base has created the now uncontrollable deflation that we are experiencing. Just like in the great depression.
Outmoded policy fixes to a new problem for want of a better word “hyper deflation.” This is condition is something the pollies have never had to battle on this scale before.
The only thing more dangerous than an economist is an amateur economist!
Quote Bartley

How much does one spend on petrol per week compared to rent?

I think Thomas you will see that over investment in land pre-empts oil.

However they are both natural resources and speculation should be discouraged with a holding charge on oil as per land.

What are you saying? The costs of running a car are only fuel?
Even so at the average travel of an Aussie driver that would be approx $1800 per year $35 a week for the commuter however that’s not the inflationary costs of oil.
There’s transport dominated by diesel driven trucks and trains
There are food deliveries
There are mail deliveries
There’s plain fuel costs and transport
There’s shipping etc, and so on
Need I go on?
To quote an American source the national average for unleaded gas hit $3.28 a gallon this week, a 26 percent increase from last year at this time. Yet, the real cost of energy dependence amounts to more than $11.35 per gallon, according to Gal Luft,
And that’s in the USA where fuel cost is half the Australian costs.

Actually, if you read my first post I immediately stated that I was the author… so I announced it straight away, no akas needed.

Anyways, I 100% agree with you that Greenspan has poor views on what causes oil prices. I also agree history is repeating itself; our current crisis, however, resembles more the Panic of 1837, 1857 and 1873 than 1929, although all were ignited by land speculation. Surely, although a monetarist, yet well read in Austrian School economics, Greenspan should have KNOWN it was STUPID to put interest rates down *too low*, igniting an artificial boom. This is what happened in the 70s, where real estate prices skyrocketed and rents were going up 75% per year. Oil spikes do not cause recessions *per se*: http://dss.ucsd.edu/~jhamilto/JDH_palgrave_oil.pdf. Rather, oil shocks simply exacerbate already poor monetary conditions (i.e. cause interest rates to rise due to inflation) and EXPOSE the malinvestments which did take place. As Karl implies, higher rents could generate “cost push inflation” just as much as oil, indeed this excellent 1973 Time magazine article discusses this precise point: http://www.time.com/time/magazine/article/0,9171,942722,00.html It points out rents rose much more than oil and that the extra demand in oil in the 1970s was also the result of massive urban sprawl and expansion.

Moreover, here is one of the reasons I am not a fan of oil being attributed as the cause or triggers of recessions.

If oil is put at the heart of one’s analysis then one must explain: A. why the US and UK economy were in decline before the 1973 oil shock (and why the 70s commercial property boom, taking place throughout Australia, Japan, the UK and the US – shouldn’t be responsible for the 70s bust, while a smaller commercial property boom was being blamed for the 90s bust);

B. why it took 3 years for the 1979 oil shock to manifest itself around 1982-83 recession while the early 70s one was apparently "immediate" (this shock came in *too* late: Western world was in recession in 73/4, same year as the oil shock, why was there a recession in 1982, three years too late)

C. why the early 1990s, which experienced a 30% increase in oil, was too late to cause the recession (due to overbuilding due to a commercial property boom) and

D. why subsequent oil shocks have not had a negative impact on the economy i.e. the 1999 spike did *nothing* to the economy in terms of growth, why the jump in 2003 did nothing (in terms of causing GDP to turn negative), the jump in 2005 did not make our or the UKs economy halt either... I think a dramatic spike in oil prices can *slow* the economy, but I do not think it can *reverse* the nations growth.

A drop in land values, however, can through negative wealth effects (impacting consumption) and bank lending as asset values plummet (impacting investment and incentives to build).

Moreover, one day oil will run out of oil, but the land question will still remain beneath our feet forever more. But basically, we are all in agreement of the problems of overinvestment in real estate, which could be funelled into say, alternative energy researh.

All crashes/booms require a stimulus.
The Bush administration increase of the budget allocation to defense spending by 40% was the stimulus for the boom from 2003 to 2008 which really petered out 2007 as the awareness of the USA deficit loomed but was ignored.
The oil price jumping from 35 to 145 was the stimulus for the crash that we are now experiencing.
Now note here I said stimulus however the popular (blame word here seems to be cause) so if that is what you pedants want then that’s what you may have.
I prefer to categorize cause/ effects into a more meaningful class.
Whig 98 points out so attentively ‘why didn’t all oil spikes cause a crash?
At least he is now asking rather than announcing.
That denotes an effect response and the response was an inflationary effect on the markets.
2003 to 2008 Dow.
The determination of a crash is a decline in the economy of approx 30%, with a normal correction being a 10% downturn.
1973 55%
1978 25%
1979 3 mini corrections of 18%
1980 83 20% decline
1991 18 %
1999 22%
This as you can see is ignoring the 10% corrections we had to have … so to speak.
Now we have established the oil market effect on the economy Mr. Whig go back to the drawing board please and dream up some new theory or turn to philosophy. Just stop annoying the realists please.