Why Another Economic Bubble In Oil?
Posted: Friday, June 13, 2008
by Missing Link
My grandmother was a conspiracy theorist. Nanny, as we called her, saw communists behind every bush. I don't know if being a conspiracy theorist is genetic or psychological but I have a touch of it myself. If a definition of conspiracy theory is the tendency to think about how specific events fit into the big picture, then I come by it honestly.
In the past twenty years or so, the middle class has been "sold" on technology, houses and cars. This is where the economic bubbles have been created, in technology, housing and now oil = gasoline = cars. I'm thinking that there is more to this than free market forces.
The tech bubble created lots of excitement in the 90's. I was working in Silicon Valley on some contracts around 1999 near the end of the tech bubble. It hadn't burst yet but it was close. The mood down there was electric. Hotel rooms were impossible to get and restaurants were full late at night and buzzing with energy. I imagined that it was like being in a ritzy gold rush town around 1850. The very air was vibrating with excitement and greed.
The tech bubble burst. Middle class people who made money in that market and had some of it left went into the housing market with a vengeance. A new bubble was created. Prices were driven up-and-up as people bought expensive homes on exponentially rising equity. More fundamental to the mania, lenders offered mortgages to anyone who could write their name. New houses were climbing in price by thousands of dollars before they were even finished. I have a friend who once bragged to me about his home under construction; he said that the value had climbed 20 thousand dollars in the month after he signed the mortgage papers. Now my friend couldn't sell that house if he wanted to. The price went down as fast as it rose.
Housing prices soared until the line in the sand between income and payments was being crossed so egregiously that even crooked lenders had to fold their tents and flee the country with their riches. Why these crooks are not being prosecuted or investigated by Congress is another conspiracy theory for another day. Yet, almost immediately after the housing bubble burst, the next bubble appeared, this time in oil.
The price in oil prices is so excessive and has risen so fast that there is only one credible answer to an ignorant, non-economist, conspiracy theorist like me. A group of very wealthy people and/or companies are manipulating the commodities market to make up for their huge losses in the mortgage and tech bubbles. What's the solution to a burst bubble? Dip the wand and blow another bubble of course.
The tech bubble soaked the middle class through the stock market, the housing bubble soaked the middle class through the credit market, and now the gasoline bubble is soaking us through our day-to-day lives meaning; food, energy, and everything else. It appears possible that the rich are using bubbles to wring money out of the middle class. Perhaps the consolidation of wealth has finally hit a critical mass where wealthy control of markets is a given.
The middle class has been twice conned into collaborating in the creation of a bubble through false promises of a fast track to wealth. The oil bubble is more devious because it means the middle class funds it simply in order to live. Now the middle class doesn't have to collaborate; it's the perfect bubble, the one that may never break.
Could the oil bubble represent the middle class' descent into serfdom where the free market is a thing of the past? Well, it's only a theory.
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Top-level comments on this article: (2 total)Missing Link, A very reasonable and smart theory! I often ponder, when will those in the middle class wake up and realize that they are being "had?" As a psychotherapist, I used to work for Managed Care companies until I realized that they were not paying me appropriately. After I stopped working for them and went to cash fee, many MCO's were eventually the target in a class action suit to recover provider's money. One day I noticed the salaries of the top CEO's in the country. United Health Care's CEO was making over 60 million a year! We have been conned by corporate greed and this political administration's economic policies. I don't think off-shore drilling is going to cut it. We are headed for a financial depression, so we better wake up soon!Hi James, Thanks for the comment. It seems to me that unless we can guarantee that any offshore oil found will be used for our benefit and not sold on the world market to China and India, we ought to avoid the potential ecological problems and focus on alternative energy and simply using less. I simply do not believe that big oil isn't going to take the oil and keep the prices right where they are anyway. Missing
Things go up and don't go down - not when it is a commodity. The answer isn't finding more oil, it's finding alternatives. We'll still pay through the nose, but at least the world will still be suitable for us to live in. As for conspiracy theories, while i believe 'they' are always finding new ways to remove us from our hard earned money, I'm not so sure this is a bubble as such. And while governments are raking in the excise duties, they aren't the ones setting the prices; that's the oil companies. My 'conspiracy' theory is that they are getting as much as they can from oil before it's either all gone or no longer used. I'm also sure that they already have alternatives in the wings waiting to take center stage. Companies that big aren't going to see themselves left high and dry without something to sell.Hi Sheryl, Thanks for your comment and insight! ML
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