bigqueue

The Dummy's Guide to the U.S. Financial Crisis

I think there is a missing component to this story....one that might simply be a back-story, I am not sure. That is the fact that it isn't just the housing market that is wrapped up in debt...but the entire US economy, and the US Dollar itself.

We have been running a trade deficit for years upon years, and the value of our work has been going down in the world....the result has been that our salaries have been effectly going down, and had we not come across the magic bullet of "outsourcing", we would never have been able to keep prices down so that we could afford our own products.

But we outsourced, and got our cheap products...but in doing so, we essentially also exported our jobs....and since out actual exports were NOT keeping up with our imports, other countries ended up having to eventually loan us the money we needed to keep buying their products.....we were essentially BROKE.

Why did they do that....well, it turns out they needed us.....our value to the world was our ability to CONSUME....they wanted to build the factories and infrastructure to produce, and they needed consumers...so they "saved" their money in order to lend it back to us to keep us fat, dumb and happy.....all the time consuming their goods, and allowing them to build their infrastructure.

Well....we have not quite gotten to the point where their middle class can support their factories....but as we slip, and they progress, they are getting darn close.

If the day comes where we are NOT the biggest consumer in the world...we will NOT be needed....and we will collapse because no one will buy our dent...and we will have to pay all our debtors.

The debt to China alone is awesome.....

So the problem is surely one of debt....but much more than just housing debt and local debt.