I think a lot of TOD readers would agree with your hypothesis that high oil prices have contributed to financial stress and accelerated house foreclosures.

While there is obvious interconnections between the different markets, I don't think there is much of an energy component to the current credit problem, outside of the damage done to investors by the whipsawing prices in the oil and other commodity markets.

This is probably a greater problem than a reading of Mr. Hart's article would suggest.

I suspect that long term flat or declining real wages and long term suppressed yield are behind the credit mess. Declining comparative wages left workers unable to afford housing without resorting to exotic credit which was magnified up the credit distribution chain by poor underwriting and risk management - the willful suspension of disbelief. Low wages and low yields conspired to reduce savings which left credit as the most accessible and least responsible form of capital. Low yields and the accompanying flood of liquidity translated to cheap lending which had increased amounts of capital chasing fewer acceptable investments.

The result has been a capture by the credit system of both current wages and wages well into the future. (Savings being considered past wages, aggregated.) When it became clear a couple of years ago that the future wages available were inadequate to service the corresponding liabilities, the system broke down.

When it becomes apparant to our overseas creditors that future growth will be inadequate to service the corresponding liabilities, the international system of credit will also break down.

Since both problems are structural and driven in exactly the wrong direction by both prejudice and public policy, the likelihood of a 'quick fix' - less than several years - is exactly nil.

The implications are sobering because this suggests the full weight of energy supply difficiencies lie in the future, after the credit system's deconstruction has accelerated. With some credit availabile there would be the possibility that some number of petro- alternatives could be brought into service rapidly, paid for by captured future earnings. With the credit dislocating and the likelihood that the US government's credibility and competence will be questioned, the difficulties of gaining the trust of creditors in any financial marketplace will be large indeed.

Further weighing on credit are the derivative/swaps originations. The fallout from the credit malfunction has just begun to ripple through the swaps and counterparty markets. The potential liabilities are stupendous and the consequences ... applying to the central concepts of 'market management', 'government responsibility' and 'authority' ... are possibly severe.

... then, Antarctica melts and the Cubs win the World Series.