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- Sep 25, 2007
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Hi all,
An article from the April 22nd edition of The Globe and Mail (Report on Business). Economist presents research findings that suggest it is "obvious" that the spike in the price of crude oil and not the US that is responsible for the global "meltdown". Excerpts:
But a consensus judgment isn`t necessarily a correct judgment. What if the consensus is wrong? Doesn`t Mr. Obama run the risk of fixing the wrong things?
Writing in the New York Post, economist Alan Reynolds (senior fellow at the Washington-based Cato Institute and author of Income and Wealth) subjected the Made-in-the-USA argument cited by Mr. Obama to statistical analysis – and concludes that the timing shows it is "all wrong" to blame the United States for the global meltdown.
"What was the mechanism by which U.S. problems were supposedly spread to other countries?" Mr. Reynolds asks. "It wasn`t by international trade. The dollar value of U.S. imports didn`t start to fall until August, 2008, and imports of consumer goods didn`t fall until September – many months after Japan and Europe fell into recession." Further, U.S. bank failures didn`t occur until September, 2008, almost a year after Europe slipped into recession.
Mr. Reynolds does not deny the U.S. housing boom, and eventual bust, of 2002 to 2008. He simply argues that it wasn`t the housing boom that set off the global meltdown. "What really triggered this recession should be obvious," he says, "since the same thing happened before every postwar U.S. recession save one (1960)." The real cause, he says, was the spike in the price of crude oil.
From this perspective, bank failures in Britain and the United States were as much a consequence of recession as a cause. As Mr. Reynolds puts it, recessions turn good loans into bad. As for crude, he says simply that recessions lessen demand for oil – and end the spikes in oil prices.
Mr. Obama proposes to tax crude oil at progressively higher rates as part of his campaign to switch the United States to renewable energy. But the price that induces significant conservation could well be the price that also induces recession. This will make it harder for the President to keep his promise – a crude promise, indeed – to abolish recessions for all time.
http://www.theglobeandmail.com/servlet/sto...BNStory/energy/
Keith
An article from the April 22nd edition of The Globe and Mail (Report on Business). Economist presents research findings that suggest it is "obvious" that the spike in the price of crude oil and not the US that is responsible for the global "meltdown". Excerpts:
But a consensus judgment isn`t necessarily a correct judgment. What if the consensus is wrong? Doesn`t Mr. Obama run the risk of fixing the wrong things?
Writing in the New York Post, economist Alan Reynolds (senior fellow at the Washington-based Cato Institute and author of Income and Wealth) subjected the Made-in-the-USA argument cited by Mr. Obama to statistical analysis – and concludes that the timing shows it is "all wrong" to blame the United States for the global meltdown.
"What was the mechanism by which U.S. problems were supposedly spread to other countries?" Mr. Reynolds asks. "It wasn`t by international trade. The dollar value of U.S. imports didn`t start to fall until August, 2008, and imports of consumer goods didn`t fall until September – many months after Japan and Europe fell into recession." Further, U.S. bank failures didn`t occur until September, 2008, almost a year after Europe slipped into recession.
Mr. Reynolds does not deny the U.S. housing boom, and eventual bust, of 2002 to 2008. He simply argues that it wasn`t the housing boom that set off the global meltdown. "What really triggered this recession should be obvious," he says, "since the same thing happened before every postwar U.S. recession save one (1960)." The real cause, he says, was the spike in the price of crude oil.
From this perspective, bank failures in Britain and the United States were as much a consequence of recession as a cause. As Mr. Reynolds puts it, recessions turn good loans into bad. As for crude, he says simply that recessions lessen demand for oil – and end the spikes in oil prices.
Mr. Obama proposes to tax crude oil at progressively higher rates as part of his campaign to switch the United States to renewable energy. But the price that induces significant conservation could well be the price that also induces recession. This will make it harder for the President to keep his promise – a crude promise, indeed – to abolish recessions for all time.
http://www.theglobeandmail.com/servlet/sto...BNStory/energy/
Keith