ennui2 wrote:evilgenius wrote:I see what you mean by blaming their debt, but you aren't thinking at the level of boots on the ground.
I've heard this argument ad nauseum. The extra gas expenses per month was small in comparison to the extras the ARM resets suddenly added to their mortgage payments. So expensive gas was a problem, but not the primary cause of the economy keeling over.
Ad nauseum, huh. I respect where you are coming from. I don't deny that the monthly struggle that people had to face was largely formed out of debt. It was going to go over at some point. The micro economics of the situation, however, doesn't reveal a tie between the monthly cost of making payments and the ability to earn an income.
During the housing run up gasoline was a direct cost of doing business for almost everyone involved in construction. When it was cheap it was nominal, a cost but just another small one on a list. Facing the resets, however, and also needing to take low gas mileage vehicles around in an effort to make any kind of money, they couldn't survive.
I'm talking marginal expenses here which grew to absurd levels. I'm making a nod to the way in the US where there has always been a dearth of a safety net support system, but a strong system under which entrepreneurs could go out and find a way. Cheap gas was part of that way.
We have never taxed gas to the point of the Europeans because we don't want to finance their kind of support systems. The lack of that kind of tax burden often revealed ways for people to make a living. The high prices in the gas price run up eliminated those opportunities at the same time as people were facing other expenses. The loss of those opportunities eliminated the chance of making payments. You can't do that when the most you can make in a day is $100, let's say, which is a pay cut but by itself still manageable, and it cost you $80 in gas to make that $100. You might if it only cost $60. At some point it becomes Abraham arguing to spare Sodom.
Incidentally, the same thing is going on again, right now. The economy is re-balancing in a very dangerous way. It is becoming full of Uber and Lyft drivers. There are so many of them that the price per ride they can receive is beginning to come down. Even though this is occurring the numbers of people who are taking to this way of earning is still increasing. It could well rise to achieve the same kind of imbalance that we saw when so many people, then it was mostly men but now it is both sexes, piled into the construction industry. All it would need would be $3.50 plus gas to bury many of those people. If that happened, of course, the price of gas would not be the thing that actually broke them, you can already see that. It would be things along the line of too much debt again, company store car debt along with other debt and probably high rent over ownership related expenses this time. No doubt the economy under which such a high price per gallon came about would also constrain the demand for rides as well. But I've never been talking about those big obvious reasons, but the marginal things because people tend to go as far as they can with something that they have committed to, until they can't go any farther. Sometimes they find a way.
And tying things back to Saudi Arabia, the current adjustments being made, Uber and Lyft not being the only ones, do rely upon cheap gasoline in order for people to pull them off. It isn't that cheap gas is the most prominent part of the equations these people make when they consider whether they want to commit to things either. It is more that people tend to borrow clear up to whatever they are making, without considering what would happen to them if things changed. The thinking is no different than knowing you have a balloon payment due sometime, but that is then and this is now. They will deal with it when it comes. They may find a way. Cross your fingers on the Saudis.