Razor Thin Logic
Source: Global stock markets fall amid oil rout – BBC News
It’s unlikely anyone is spreading this misinformation on purpose; more likely it’s misinformed people grasping at explanations. We don’t need to resort to scholarly explanations, the simple math goes like this; when the cost of essential living instruments decline, that’s a good thing. Fuel, food and shelter constitute the basic costs for most people’s survival. Internet connectivity is not, nor is coffee, sports tickets or shoes.
When ‘analysts’ all agree in concert and point to the decline of a fundamental product like crude oil as being the cause of a stock market meltdown, it begs credibility. Recall that years ago, when oil prices moved from $20 dollars a barrel to over $120, forecasts were common that havoc would ensue for all of the world’s economies. Somehow, economies adjusted. Things got more expensive, but they adjusted.
As the price of crude tumbles, there’s no question that oil related concerns will suffer, but the benefits to the larger economy far outshadows the grief in that sector. The cost of everything from air travel, trucking of goods, vacations, heating and manufacturing, declines! The losers; exporters of oil, including the Saudis and Canadians.
So, linking the stock markets’ declines to the collapse in crude is a spurious correlation. It is far more likely that the cause of the markets’ swoon is better explained by Occam’s Razor. This is the principle in physics which posits that given different explanations for an event, the simplest one is probably the best. Quite simply, prices were too high in the stock market and not sustainable. But that’s too elegantly simple for people who make money giving iffy explanations of things post facto. Let’s hope food and shelter prices don’t crater by 80%, it would certainly mean Armageddon.