Dominoes or house of cards?

If you’ve been watching the financial markets lately, you may have noticed that the Federal Government has been giving out more corporate welfare dollars. $10 billion here, $10 billion there; pretty soon it adds up to real money – over $60 billion in the last two weeks were pumped into the market to support collapsing hedge funds and mortgage-backed bonds held by investment companies.

It all started back in the post-9/11 environment when President Bush thought the best way for Americans to show their support for the country was to “go shopping.” Easy credit, low interest rates and unprecedented government spending (mostly on military budgets) fueled what appeared to be an economic boom. More and more people were buying houses, SUVs and flat-screen TVs. It seemed like it could go on forever.

“No credit, no problem,” zero-percent interest rates, no down payment, no payment for two years, spend, spend, spend. The Republican-controlled Congress and White House also went on a six-year spending spree that seemed to have no downside. But the bill is just now starting to come due. As those adjustable interest rates start to rise, property prices drop, housing sales slow down and credit tightens; suddenly, people realize that it isn’t a free ride.

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