Why does the stock market crash when the oil price crash? Shouldn't cheap oil mean an economic boom? Sure, it's bad for the companies that sell oil, but for everyone else, it means cheaper energy, transport, plastics etc, which again should mean cheaper components and manufacturing, and business should be thriving. So why doesn't this happen?
Because it is a larger indicator of things going sour, and much of the recent US boom was because of the succes of fracking, which is now loosing billions of dollars of value and the loand the companies have to pay back will bankrupt them
>Why does the stock market crash when the oil price crash?
Low interest rates facilitated a investment bubble in the oil sector. This increased oil production 70%. Now oil is crashing, and what remains is loads of debt. So we might see debt default cascade soon.
Ding ding ding. Nailed it right on the head. Large spreads of debt default - whether from homeownership, student loans, land, etc. will always dip the market since so much of our market relies on interest returns as a means of profiting.
I work in a major container shipping company. Since 90% of consumer goods are transported by maritime containers, many see it as a great metric of the global economy.
Our line of business has never recovered after 2008-2010. The matter is that not only are there too many vessels, but there are not enough businesses moving goods.
I hear that's also the problem in the drybulk trade.
So essentially, one could interpret this that world industrial output has never recovered since the great recession. The economic "recovery" is largely a lie.
Forgot to add the main point - since economic activity is low, demand for oil is low and supply is high.
Who cares if trucking or shipping goods is cheap, if there's low demand for the said goods in the first place.
This is why the fed is a complete fucking joke. An absolute fucking joke. Its one thing to worship the invisible hand, its another to direct it. Everyone's behavior is now coupled with a fiat market. What did anyone really expect?
Also a growth based economy, in all cases, will contract. There will always be a limiting deterrent of growth.