from AlterNet:
America's Addiction to Debt Finally Crashes the SystemBy John F. Ince, AlterNet. Posted September 18, 2007.
Market evangelists created the wreckage, but ordinary working people will bear the greatest burden. We have to deal with the fundamental reality that Americans are addicted to debt. Debt today in the United States is at an all-time high in each of the three primary sectors: public, corporate and consumer debt. The national debt last week topped $9 trillion, up from approximately $5 trillion when George Bush took office.
To put this in perspective, the government of Bush & Co. has borrowed almost as much as the governments of all the other presidents of the United States combined. Consumer credit is now at scary levels almost: $2.5 trillion, and analysts are beginning to speculate that credit card debt could be the next bubble to burst. Corporate debt has reached astronomical levels through highly leveraged private equity deals, and no one knows just how how much froth is still in the system.
Central banks worldwide have reacted to the crisis by injecting over $700 billion into the global financial system. This is an astronomical level of liquidity, but it seems somehow to defy any human element. However, it has intensely human consequences that will affect each and every one of us. By pumping so much liquidity into the system, it ultimately inflates the currency. Put in human terms, everything is going to start costing us more. Even worse, this approach simply postpones the eventual reckoning.
For the average worker who is already struggling to make ends meet, this could have devastating consequences. Median family earnings of $48,201 in 2006 were 2 percent less than they were in 2000. So already people are running on the economic treadmill, like hamsters, spinning faster, working harder and making less.
For those who had taken some measure of financial solace from the appreciation of their homes, the game has suddenly taken a turn into a dark tunnel. Prices which had become divorced from reality, are now being corrected with a vengeance. Here's the rub for homeowners: When real estate prices go down, the debt associated with those assets does not go down. This induces a downward spiral of asset values induced by negative leverage. With a record high of 15.75 percent of all subprime loans now 30 or more days past due, many homeowners now are stuck with negative equity. ......(more)
The complete piece is at:
http://www.alternet.org/workplace/62787/