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The Best News of 2008

By Morgan Housel - Updated Apr 5, 2017 at 7:51PM

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The past year wasn't all doom and gloom.

As 2008 winds to a close, it's hard to remember the year as anything other than 365 days of financial shock and awe. Real estate plummeted. Foreclosures surged. Banks disintegrated. The stock market crashed. Bond markets went haywire. Wall Street as we knew it died. Ditto for GM (NYSE:GM) and Ford (NYSE:F). Nouriel Roubini became an A-list celebrity. It was a mess.

But was everything really doom and gloom?

Not at all. In fact, some of the biggest headlines of the year might go down as some of the best news we could have ever asked for. As Oscar Wilde once put it, "We are all in the gutter, but some of us are looking at the stars." Here are a few of the best news stories of 2008.

People started saving money again
In 2005, consumers actually spent more than they made, creating negative nationwide savings rates for the first time since the Great Depression. As real estate surged relentlessly higher, and risk awareness practically vanished, the thought of saving part of your paycheck for a rainy day seemed like financial suicide. Perpetual sunshine was here, baby!

Happily, those days are toast. In the second quarter of 2008, consumers saved more than they had since 1995, and 10 times more than in the first quarter. August was the first month in more than a decade that consumers paid off more debt than they borrowed. Why is that important? Because a country that doesn't save a dime relies on other countries' savings to fund everything from deficit spending to technology investments. That same reliance on other people's money pushed the current financial crisis into overdrive.

High oil prices woke us up
"The cure for high prices is high prices," the saying goes. As painful as this summer's bout with $4 gasoline was, it was the only thing that could get consumers to change their driving behavior, and spur the investment community to take alternative energy projects seriously.

Sure enough, we drove billions upon billions of miles less than in previous years, public transportation usage exploded, "peak oil" became a household phrase, companies like Sasol (NYSE:SSL), First Solar (NASDAQ:FSLR), and Tesla Motors started to really catch people's attention, and the country got the first taste of what sky-high gas prices taste like since the '70s. As hard as the changes were, it was the best medicine a country addicted to foreign oil could ever ask for.

Of course, now that oil prices are the cheapest they've been in years, a lot of that necessary change has gone out the window. It's a step in the wrong direction, but at least we now have an inkling of what it'll feel like when high energy prices inevitably return. Baby steps here, people.

The 800-pound gorillas are gone
Every one of the big financial institutions that was overleveraged and overly stupid to a point of no return is pretty much toast ... save for maybe Citigroup (NYSE:C)

After the death (or buyouts) of Countrywide, Bear Stearns, Lehman Brothers, Wachovia, Washington Mutual, AIG, and, ahem, Bernard Madoff, all that remains of the finance world are banks like Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC). While these companies undoubtedly have a treacherous road ahead, they aren't nearly as vulnerable to the kind of spectacular collapses that filled 2008.

I don't think anyone would ever say we're out of the woods, but the true stars of "Wall Street's dumbest criminals" are, for the most part, history. For those still remaining, the dumbest-of-dumb practices that got us where we are --subprime lending, 30-to-1 leverage, and insuring mountains of CDOs even Houdini couldn't untangle -- are a thing of the past.

The financial system didn't completely collapse
Say what you will about the $700 billion bailout, but its mere announcement helped prevent the financial system from a complete collapse back in September. Yes, it's still a bloody mess, but banks didn't completely collapse in a way that would have permanently shut down anything and everything related to lending, which is exactly where we were heading in September.  

As easy -- and seemingly appropriate -- as it is so say, "let them all die," that's taking the wishful assumption that the entire economy as a whole could survive without a properly functioning banking industry. I don't think Ben Bernanke was being a sensationalist drama queen when, on the eve of the bailout, he said, "If we don't do this, we may not have an economy on Monday."

On that somber note, here's to a better, more prosperous, and hopefully quieter 2009.

For related Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Sasol is a Motley Fool Global Gains selection. Sasol and Bank of America are Motley Fool Income Investor recommendations. The Motley Fool is investors writing for investors.

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Stocks Mentioned

Ford Motor Company Stock Quote
Ford Motor Company
$15.78 (3.14%) $0.48
Citigroup Inc. Stock Quote
Citigroup Inc.
$51.47 (-0.37%) $0.19
Bank of America Corporation Stock Quote
Bank of America Corporation
$33.49 (-1.38%) $0.47
Wells Fargo & Company Stock Quote
Wells Fargo & Company
$43.19 (-1.30%) $0.57
First Solar, Inc. Stock Quote
First Solar, Inc.
$106.74 (4.75%) $4.84
General Motors Company Stock Quote
General Motors Company
$37.56 (4.16%) $1.50
Sasol Limited Stock Quote
Sasol Limited
$20.63 (1.98%) $0.40

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