Will The Credit Crunch End In 2009?

The hope is that the economy can somehow rebound quickly and 2009 could be the year we all return to prosperity. This is a dream that may be nice to hold onto, but it isn't likely to come true.

Hopes are high that a new year will bring a new spin on the worsening economic condition, but if you consider how long it took for the credit crunch to build steam to where it is today you will see that it is not likely to end anytime soon.

So will the credit crunch end in 2009?

The answer is more than likely it will not. The credit crunch is a result of years of loose lending practices that gave homes, cars, and credit cards to people who could not afford to pay back the money in the long run. It was a money maker for banks who could take in the initiation fees of seeting up subprime loans and collect much larger interest rates to make up for the risk these borrowers brought to the table. The practice of bundling these risky debts together and selling them to investors was another way to bring in profits, but as these debts turned bad and the borrowers stopped making payments we had the makings of today's credit crunch underway.

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It took years for all of this to play out and for the consequences of easy subprime lending to be seen, and we have not seen the worst of it yet. By all predictors the situation will only get worse in 2009, though there is promise that it will eventually get turned around one way or another.

So will the credit crunch end within a couple years?

This is possible. Some experts in the economy are predicting two to three years for things to start looking up. Remember that there is no sudden stop where things just turn around and are back in functioning order. The economy works on dips and rises and we are in a very low dip right now. It will eventually rise back up, but it's more of a gradual uphill climb than a surge straight to the sky.

Further, there is still quite a ways the economy could fall, so we have not even seen the bottom of the credit crunch yet. Things may even get as bad as the Great Depression by the time it starts to get better. This is not what many people want to hear, but when it takes years to get into a situation it just is not possible to get out of it overnight. It takes time for the market to pick back up again, and also for people to restore their trust in the market.

Trust in the market is at a low right now as well, which means people are saving up their money and not buying as much out of fear of what may be coming. This is caused by the rapid rise in prices on everything from food to gasoline. It will take time for people to start trusting the economy is strong and to start spending again.

So bottom line, when exactly will the credit crunch end?

It's not a sentence that gets a quick period before a new sentence begins. Our economy is better related to rolling hills with lots of rocks to slow down the process. You have to get to the bottom with enough steam to push up the next hill before you can reach the top of prosperity once again.

No one can really predict when things will turn around, but many people are starting to ask a new question entirely: will the credit crunch end at all? It can feel like the country is collapsing and there may never be a real recovery, but with a little understanding of economics most people can lay those fears aside and wait for the next uphill swing to come around.

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