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. 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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