The odd thing, is that 3/4 of the way through the report is some commentary from two Lehman Bro's "experts"..who were , at the time, no doubt, cooking the books :rofl:
But the overview gives a very easy-to-understand primer on how we have dug the hole we can no longer see out of:(
http://www.imdiversity.com/villages/global/business_finance/APSpecialReport2.aspThe United States: Heavy Debt Load Causes Vulnerability to Rising Rates, Foreign Currency Imbalances
Growing debt has long been a concern in the United States, from individuals buying on credit to Washington budgets. But many economists are now warning that runaway spending and borrowing have the nation on track toward a major economic crash. The second in a three-part series, this story looks at scenarios in which debt could cause a major economic setback.
Special Report- Part Two
August 26, 2005
By EILEEN ALT POWELL
NEW YORK (AP) _ Buy now, pay later: It's been the mantra of American consumers for decades. The results are obvious in the ballooning balances on credit cards and mortgage loans, and in the mushrooming U.S. trade deficit, which reflects the nation's nearly insatiable appetite for cheap, imported goods. Low interest rates, especially since the end of the 2001 recession, have fed the debt beast at home, allowing American consumers to accumulate nearly $11 trillion in debt as they buy more homes, more cars, more clothes, more dinners out. At the same time, foreign investment in the United States is helping to keep the dollar strong, which holds down prices on those imports that Americans covet.
But what would happen if interest rates suddenly weren't so benign, or if foreign governments, corporations and individuals stopped investing so heavily in America? Some analysts fear such actions could trigger doomsday scenarios in which the bills come due and Americans can't pay, with devastating consequences for the entire economy. The Associated Press asked some experts to discuss what could burst the debt bubble in three areas that appear most vulnerable, and to offer a rebuttal from the perspective of people who believe that while the country may be in debt, it's not in danger.
CREDIT CARD CRUNCH
The tool that has made it ever so easy for Americans to buy and buy and buy is the credit card. And buy they have. Outstanding balances on credit cards have risen to more than $800 billion, or some $7,200 per U.S. household. That's the equivalent of three plasma TVs, or 24 iPod digital music players, or more than 1,200 Big Mac meals. It's more than double the indebtedness of a decade ago -- and it doesn't include an additional $1.3 trillion in debt for cars, appliances and personal loans.
With the savings rate hovering near all-time lows, most consumers don't have reserves, and so they're vulnerable to an economic shock. What if interest rates suddenly shot up, say 3 percentage points or 4 percentage points, requiring burdened borrowers to greatly increase the amounts they have to pay each month on their debt?
snip ...................for the "rest of the story"
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