Blame high oil prices for recession, CIBC says

OTTAWA — Forget blaming the global recession on dubious mortgage practices in the United States - blame high oil instead, says Jeff Rubin, chief economist at CIBC World Markets.

“The recent spike in oil prices doesn't seem to get any credit for what's happening to the world economy now,†he says in an analysis released Monday. “That's odd, because it should.â€

Blaming subprime mortgages for the crisis doesn't make sense, he argues, because those loans don't have the scale to topple Japan, Europe and much of the advanced global economy.

“How do falling property values in Cleveland create a recession in Japan, and the Euroland economies, before they even create a recession in the U.S. economy?†Mr. Rubin asks. “And if Cleveland and its ilk are really the epicenter of all the world economies' ills, why is the rest of the world buying greenbacks?â€

The effects of subprime mortgage lending have spread into global financial institutions and stock markets because of leverage and securitization, Mr. Rubin recognizes.

But subprime loans can't be held responsible for bringing down global gross domestic product. High oil prices, on the other hand, have been responsible for four of the last five global recessions, he points out.

More: reportonbusiness.com: globeinvestor.com - Blame high oil prices for recession, CIBC says