We can prove that Kunstler is correct because when gas prices spiked to $4.00+ the rate that the value of a given home began to drop was directly proportional to that home's distance from the nearest major city center. I recall the Washington Post even created a map of this produced by Zilllow.com's data sets. This caused gridlock in finance because all the new McMansions are being built in cornfields, far from the city - it was more than enough to set off a chain reaction in the Ponzi securities.

Bailout or no bailout, it won't change the fact that until we transition our economy to one that is less energy intensive the triangle of finance, insurance, and real-estate will remain a perpetual powderkeg, with the price and availability of oil&gas being the fuse to light it. Unfortunately the USA is at the end of the worldwide supply chain for oil & gas distribution, and exporting nations will most certainly nationalize the remaining resources for their own growth, leaving little to spare.

Realistically the only option for the USA is to build out nuclear and the remaining coal reserves, as well as all the wind and solar, and wave power we can manage to harvest, but even this will only power a fraction of our current energy consumption. That is why we must transition to a way of life that requires less energy. That means electrified railroad networks, bicycles, and dense cities surrounded by farmland. The framework of highways and suburban development is useless when oil & gas is expensive for the middle class, and this is a powderkeg that will perpetually explode in the form of finance schemes that can no longer be sustained - as well as the more mundane but painful experiences of everyday middle-class problems.

Kunstler is at his best when writing about urban planning and design. He is no expert on economy and spews some truly repulsive stuff about US foreign policy.

He seems to have totally written off any kind of technological alternatives to the current transportation fuels. The development of the alternatives is running late and the transition will be painful, but the scientists and engineers may surprise him yet. I think he is right in that the current volume of motoring will not be run on ethanol and certainly not hydrogen, but it may well turn out to be possible to run a smaller number of more efficient vehicles, some of them battery powered, some with some biomass-based fuel. Trains and bicycles will take their share.

Kunstler's vision seems to be that either everyone must learn to live like the amish or else we'll have a Mad Max -style dystopia. The knowledge of modern technology does not just disappear because oil gets expensive, and I'd argue that the development of the alternatives to cars with internal combustion engines has only just begun.

It is a financial problem: excessive optimism (stocks will always go up or real estate will always go up) convinces people to take shaky loans to buy things they can't afford, since they believe that future increases in value will save them. When people begin to realize that it has gone to far, they begin to sell. As a result, values stop going up and other people who counted on the rising values are forced to sell, and values crash.

Higher prices of oil undoubtedly contributed to the loss of confidence this time, but there would have been a crash anyway - maybe just a bit later.

But oil prices will keep going up, and they will cause another set of economic problems even after the housing market settles down. Those economic problems will be based on real-world shortages, not on financial manipulation, and so we will not be able to cure them with financial bailouts.