Thursday, December 11, 2008

Great post on "How Things Changed"

(click graph to enlarge)

Ryan Avent has an insightful post at Gristmill that every city, county, and state official in Oregon (and the US) ought to read and heed:

There's a remarkable graph that has starred in blog posts and news stories with some regularity over the past year. It shows vehicle miles traveled in America over the last quarter century or so. For most of the period, the line rockets upward, straight and true, preparing to blast off the page. But then the strangest thing happens. In 2004, it starts to level off. And in 2008, it begins to decline.

The tale behind that line grows in significance by the day. That rocket-ride upward corresponds fairly directly to the economic story that has culminated in the current crisis. Americans moved outward from cities in droves in the 1980s and 1990s, buoyed by cheap oil prices. Commute times soared as metropolitan areas stretched into the distant exurbs, many of which now lay devastated by housing defaults and foreclosures. As demand for oil increased, so too did prices, which led to a stream of money flowing into the Persian Gulf. Gulf nations recycled it back to us by buying American debt, thereby facilitating the massive borrowing that fueled the housing bubble.

In the end, high oil prices also helped to pop that bubble. The squeeze expensive gas placed on household budgets helped push marginal homeowners over the edge, fueling the credit conflagration, before finally exhausting the American consumer and tipping us into recession. And an epic recession it will be -- large enough to sink oil prices and the international financial system that sustained American debt-supported consumption.

Read the rest there.