ABSTRACT
The economic impact of a financial sector meltdown alongside downturns in the housing and auto sectors will take many more years to untangle. The conventional wisdom remains that distress in global financial markets was the main cause of the recession, resulting from risky lending behavior for home mortgages and other practices. There are reasons for viewing the interacting problems in the US financial, housing and auto sectors as multiple factors contributing to the economic recession. For commentators writing in early 2008, the evidence of dysfunction in the US and other financial systems in 2007 seemed hardly different from most previous episodes of disruption. Oil price increases also weakened the housing sector and played a role in undermining an already fragile financial sector. The wake-up call could truly force a halt to hole digging—no more expansion of oil-fueled transport—and sharply focus investment of human and financial resources on deploying alternatives.
