There’s no denying it. 2008 was a tough year.
“The ironic thing is that in January 2008, the economy was already shrinking, we just didn’t know it yet,” Goshen College Associate Professor of Economics Jerrell Richer said.
Richer, a former resident of California who watched the housing bubble build, has been following the economic downturn with some interest.
“We didn’t learn until November that the economy peaked in December 2007. Intuitively, though, even in early 2008, people knew we had problems.”
He pointed to the string of events most are now quite uncomfortably familiar with. Near the beginning of 2008, foreclosures were already popping up around the West Coast. Although followed by a multi-month lull, the first of the RV layoffs in Elkhart County began in January. Gasoline prices began their climb to prices previously unheard of. Then, with the announcements of the Bear Stearns and Lehman Bros. fiascoes, the downturn began to pick up speed.
Even with those notices, Richer said, we still didn’t realize how bad things were going to get, because the data being released — unemployment rates and the like — were nearly three months old.
“It’s like if you’re driving in your car and you look at the speedometer,” he explained, “but it tells you how fast you were going three months ago.”
As everyone from political pundits to presidents and average joes have been trying to make sense of things, one question has received more attention than almost any other. What actually initiated the fall?
“I think we do know what some of the causes are, but some of them are immediate and obvious while others are fundamental, subtle and long-term,” Richer said.
He believes three particular long-term trends were integral in greasing the wheels for the economic slide.
In the 70s, he said, average household savings were close to and sometimes more than 10 percent of their income. In 2007, that number was less than 1 percent, almost zero. He argues that it didn’t happen all of a sudden.
There’s no denying it. 2008 was a tough year.
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