Every historical event has its Cliff's Notes narrative:
The Depression was caused by the Stock Market Crash of October, '29. The Civil War started with the attack on Fort Sumter. Abner Doubleday invented Baseball in Cooperstown, New York, etc., etc.
The latest installment of these tenuous bits of fictive laziness is "the Crash of '08 was caused by the Subprime Mortgage Meltdown". Much as I loathe the non-Euclidean Representative from Massachusetts, I cannot lay the blame for the recent Peto-Bismol economy at the feet of Barney Frank, and his gang of Merry Pranksters on the house Banking Committee.
Sure, these bumbling fools rather peered into the gas-tank of economic woes via match-light, but the troubles began long ago, about the time these same esteemed congressional colleagues were playing air guitar to Bohemian Rhapsody .
The last oil refinery sited, permitted and constructed was finished in Whiting, Indiana in 1975. Since that time, no new sites which had been federally permitted have actually been built. The one in Elk Point, North Dakota was green-lighted in 2008, but, like all such facilities, has been tied up tighter than a pretzel by the Sierra Club and other pantie-twisters, and will likely be on-line about the time Buzz Lightyear invents Crystallic Fusion, circa 2078.
Many states that used to have small, independent distillate plants have no refineries whatsoever, and those former sites find themselves on both the Superfund List, and the Christmas Card List of the local Environmental slip-and-fall shyster. Michigan, for example, used to have, as late as 1965, 8 independent refiners. Today, there is only one, the Marathon refinery in Detroit.
So, as the world-wide economy revved up in 2002, the United States lacked refining capacity to keep up, not only with increasing demand, but the requirements imposed by the dandruff set at the EPA and their "boutique" seasonal fuel blends. This meant that refined fuel wholesalers increasingly found themselves having to import product (especially home heating oil) from other countries, which began the upward supply pressure. Then retail gasoline prices began to rise, and finally to spiral in late 2006.
The folks who purchased homes using no-down payment, "sub-prime" loans could afford them when they bought them. Barely. When the price of gasoline doubled in 24 months, from $1.50 to $3, suddenly the family budget went kablooee. When the choice came down to putting gas in the tank to get back and forth to work, or paying a mortgage against which you never got ahead because all you were doing was paying interest anyway, (and was guaranteed by Barney Frank to boot)-- guess which lost.
In fact, if you track the home-mortgage default rates as an overlay on top of the historical spikes in the retail gasoline prices, they fit together like and EKG-- First, the retail gasoline price spike hits, then, six months later, the default rate spikes.
THIS is the taproot of the '08 meltdown. It was called a "bubble" that "burst", but this implies that robust, vibrant economies are only vaporous bits of fragile cellophane. The last thing a market wants to do is "burst", and it will naturally find the equilibrium to stave it off, if left to it's own devices. It is only when a free economy is tormented and hampered by the iron fist of a regulatory state seeking it's own nefarious aims that markets "burst". Lendable capital is seldom a bad thing in a free economy, and such is the case with sub-prime loans. If you are a big enough dork to want to pay for the next three generations before you pay off a loan, well, that's what dorks DO. And banks can make money doing it. If the economy was left to it's own devices, gasoline would have been in plentiful supply, people would still have been able to pay their mortgages, and the economy would still be humming along.
Sadly, Paul Erlich, Maragret Meade, David Etnier, Rachel Carson and all the 70's ecological scolds sufficiently terrified congress and subsequent Presidents into believing that Big Daddy Warbucks was on the prowl, befouling the pristine streams and polluting the virginal forests for eeevil profits.
So, the Stalinists entombed in the EPA made it nearly impossible to not only site new refineries, but also to operate smaller-market refiners that couldn't afford the byzantine updates and regulations. The oil and refining industries is one of the most heavily regulated in the United States. The Material Safety Data Sheets alone stretch for untold volumes. Unless you are an Exxon-Mobile, or a multi-national venture capital group, you can't afford to keep up. So, you give up, and the public suffers from the lack of choice and capacity.
There is much fear and loathing in the countryside about the looming monster called "cap and trade", as well there should be. But, we've been to this rodeo before. We know the economic disaster we create when we sacrifice our economy upon the alter of extreme, radical, statist environmental industrial policy: It was the cause of the '08 Crash . If our market was truly "free", there would have been plenty of refined petroleum for all U.S. consumers in 2004-2006, including the sad-sacks with sub-prime loans. But, there wasn't enough such refined petrolem because our economy has been forcibly bent to the will of environmental extremists.
If you think about it, our economy remained (and still remains) so vibrant and growth-oriented that the strangling fingers of the federal environmental leviathan can grope and squeeze, and we still are able to house and employ nearly 300,000,000 souls. Imagine what would happen if this cancerous malignancy was removed.
Imagine a nation where we have all the oil refineries that we not only need , but want . Imagine a nation where each state has three or four pebble-bed terrestrial reactors whipping out electricity that's darned near too cheap to meter. Imagine a nation where we are safely pumping, and pumping, and pumping out of the ground all of the oil that we could ever use for six or seven generations. Imagine gasoline at 20-cents a gallon. Which it could be, if we'd only let the market compete.
I won't even go into the speculators in the pits that use oil as a currency hedge (-they only do it because the jacked-around system has devolved to the point where it makes sense to do it). No, the source of the Crash of '08 was our cultural and political weakness to stand up the extreme environmentalist and their Marxist world-view. Capitalism by nature makes the highest and best use of our God-given natural resources, and we need to start standing up against these squeebs.
Did you get this, Mr. McConnell? Mr. Boehner?