Massive Debt Could Trigger Great Depression
by James Buchanan
Millions of Americans bought houses in the last few years at seriously inflated prices. If the economy should ever start to slow down and the people, who bought these homes, lose their six figure salaries, there could easily be a domino effect that takes out most of our economy. At the least, the unemployed former home-buyers with the big mortgages will not be able to pay any of their other bills. They won’t be able to make payments on their two luxury cars. They won’t be able to pay for their children’s university tuition. And they won’t be buying any plasma screen TVs or other consumer goodies for a long, long time. The sharp reduction in spending will put even more Americans out of work, and their spending will stop also.
A recent news article reports “The United States is headed for a recession that will be ‘much nastier, deeper and more protracted’ than the 2001 recession, says Nouriel Roubini, president of Roubini Global Economics… Wednesday, Roubini repeated his call that the U.S. would be in recession in 2007, arguing that the collapse of housing would bring down the rest of the economy.” (more…)