A couple weeks ago, I listed several things that Rick Santorum has said that I thought were somewhat over the top or even outrageous. A good friend of mine did not see anything wrong with any of the statements that I listed. Well, today in Lansing, Michigan Rick Santorum said, “We went into a recession in 2008 because of gasoline prices. The bubble burst in housing because people cannot pay their mortgages because they’re looking at four dollars a gallon gasoline. And look what happened, economic decline.”
Now this is simply flat-out nuts. There is no self-respecting economist in the United States who is going to sign onto this theory that gas prices caused the great recession. Here are the gas prices over the last 60 months.
According to the government, the great recession started in December of 2007. Gas prices didn’t start to rise until April or March of 2008. The timeframe is all wrong. Of course, if gas prices were truly the cause of the great recession, when gas prices fell in late 2008 and early 2009, the economy should have picked right back up immediately. That didn’t happen.
The exact cause of the great recession is a tale of complex financial tools (credit default swaps, CDO’s, synthetic CDO’s and mortgage-backed securities) and massive over-leveraging. The great recession had little or nothing to do with gas prices. I don’t know what Rick Santorum is smoking, but when I have a week off I would like to have a kilo of it. I guess for Rick desperate times call for desperate measures. He has to win Michigan or his bid for the presidency is over.