A clear and succinct analysis Phil. Oddly the current meltdown doesn’t feel so unique to me. I moved to Houston in 1978 at the beginning of the oil boom. Of course, this was a period of “oil shock” for the rest of the country. In retrospect that period locally has many similarities with the national trends of the last 10 to 15 years: rapid economic growth, low unemployment, very easy credit (all you had to do was put “Oil Industry” employment on the app and you got a $10,000 unsecured limit on any number of credit cards), rapidly escalating home values with easily obtained mortgages (even with mortgage rates hitting 16%), strong infrastructure growth and a tremendous rush towards the suburbs.

Then there was the local bust in the 80’s which mimicked many of the current negative trends. In the sense that you describe, Houston was highly leveraged by high oil prices as was the national economy leveraged by low energy costs. The huge drop in home valuations coupled with crushing high end unemployment (favorite joke at the time: home many geologist can you fit in the back of a pickup: two…you have to leave room for the lawn mowers) delivered just as bleak future as we now see for the nation as a whole. Houston did survive, of course, but it took every bit of 10+ years to recover to any significant degree. Excluding agriculture, Houston’s economic history could serve as a model for the nation’s current ills. Some big differences though: Houston didn’t have the Feds trying to bail it out (a double edged sword) nor was the world pushed into a recession. Just the opposite: $10 oil in 1986 can be defined as the beginning of this last national/global boom IMO. It’s difficult to imagine current ills being corrected any quicker than Houston recovered. In fact, a 15+ year time frame seems more reasonable.

And, true to the cyclic nature of commodities, Houston’s boom continues today. How long it will continue to do so will again depend on how long oil prices stay low.