Here is an article from the Associated Press “Retail Sales rise unexpectedly in January”. Really? Unexpectedly? Really? How can this be unexpected? Oh yeah, silly me, the Economic Recovery Bill hasn’t passed yet, so in theory, this cannot be possible. However, it is what it is and it has happened. So what is really going on here? Simple, the economy is beginning to recover on its own. Yes, I said “On its own.” I know for some people it is hard to believe, but it is true.
Let’s take a look at what has happened over the last year and put the pieces of the puzzle together. The two biggest factors were gas prices and house prices. These are the two biggest items that drives a person’s day to day life. When light crude oil prices reached record levels in 2008 at almost $150 a barrel, gas prices were around $4.00 a gallon or higher. At the same time, real estate values were plummeting at record levels and no one could sell or refinance without taking a hit.
Foreclosures reached historic levels in 2008 and prices started dropping fast as these properties either went through foreclosure or loan modifications. While everyone expects even more foreclosures over the next couple of years, that is to be expected as that always happens after a boom, which we went through one of the largest and fastest booms in history.
Since gas prices dropped and real estate values plummeted around the country, credit became tuff to come by and everyone was forced to re-budget themselves personally and in business if they ran a business or were self employed. This credit crunch made it difficult to spend extra money in December for Christmas. However, that is also around the time that the credit markets began to free up. And I don’t believe it had to do with 2008 TARP bailout bill as much as it had to do with everyone being forced to re-budget themselves and their businesses. Once that happened, it took a couple of months for the financial industry to clean their books up as well and begin extending credit again. The 2008 TARP funds may have helped quicken this recovery, but the recovery would have happened on its own, as it always has in the past.
As in any recovery, there will be tough times ahead, but if we don’t face them, we cannot fully recover. People still need to create new budgets and companies still need to restructure. But the sooner we all face the facts, the sooner we can get back to a normal life.