Two years after the steep recession of 2008-2009, the economy appeared to be picking up steam, only to have the pace of growth sputter and potentially stall. The reason for this rather disappointing comeback is the nature of the downturn itself. Not only did we have a traditional economic recession as part of the normal business and inventory cycle, but on top of it we suffered a far less frequently occurring credit recession which resulted from everyone—public sector and private—borrowing too much, spending too much, and expanding their debt.
The economy now faces headwinds because of the lingering effects of the credit recession, which will likely cause another contraction in early 2012. The good news, however, is this downturn will be comparatively mild and will likely spark positive changes, particularly with regard to reducing personal debt levels, that could really get things moving again.
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