Originally published September 23 2005
Credit cards, low housing rates could come back to bite Americans
by Mike Adams, the Health Ranger, NaturalNews Editor
In an Associated Press article, financial analysts warn that Americans' overspending with credit cards and consumer frenzy in the wake of ultra-low housing loan interest rates, are creating deficits that could decimate the U.S. economy if certain events caused the bills to suddenly come due.
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.
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 economy.
By most reckoning, this is "good" debt because consumers are investing in appreciating assets -- and they get a tax break on interest payments to boot.
The fast run-up in prices in recent years has made many homeowners feel wealthy, so they can ramp up day-to-day spending.
But wait: Millions of Americans have taken advantage of low rates in recent years to refinance their mortgages, with as many as eight in 10 in some quarters taking on larger loans so they can cash out some of their equity, according to mortgage giant Freddie Mac in McLean, Va.
And borrowing against home equity rose to a record $715 billion last year, and it's projected to rise more this year, according to SMR Research in Hackettstown, N.J.
At the same time, China is one of the largest foreign investors in U.S. Treasury securities, with its holdings of $244 billion, second only to Japan.
All content posted on this site is commentary or opinion and is protected under Free Speech. Truth Publishing LLC takes sole responsibility for all content. Truth Publishing sells no hard products and earns no money from the recommendation of products. NaturalNews.com is presented for educational and commentary purposes only and should not be construed as professional advice from any licensed practitioner. Truth Publishing assumes no responsibility for the use or misuse of this material. For the full terms of usage of this material, visit www.NaturalNews.com/terms.shtml