So many people borrowing and doing so cluelessly.... this was a-coming long time ! I asked my friends who have houses payments in US "whats the rate of interest on ur loan?" they tell me "oh, we don't know that - but our monthly mortgage pmt is XXX dollars...!" They don't know for how long they have to pay and what happens if they can't pay - with 1 Bln-a-week Iraq war and 3.50 dollar a gallon of gas - this was coming a long time...! But how did it happen?

Blame it on Mr. Alan Greenspan - In his tenure as the FED chief, his policies created a financial scenario that allowed people to buy more than what they could afford and bolstered the economy such that it created an artificial increase in demand - termed as a bubble! This lax policies allowed financial institutions to lend to people with poor repayment abilities. This went on good for a while as these people made payment for a few months and then they could not.. This caused the rates of such loans to increase to the "default rate" This is a KILLER! because a person who cannot repay a loan @ 5% certainly cannot repay the "default rate" which is 3-4 times the regular rate!!

But alarms were not raised because banks thought - "we are making more profit as the borrowers have to pay the default rate" - the banks became greedy!!

Soon more and more loans became delinquent. The banks thought they had nothing to fear as they could always take possession of the houses and sell it. The problem happened when the people stopped buying houses - the housing supply became more than the demand, causing property prices to spiral downwards! This was something the banks were not ready for and the value of the property became less than the loan itself - still no alarms!

Now, keep in mind, house loan is not the only loan people had - there are car payments, credit card payments, etc as everything is bought on installments - the people enjoyed the spoils of luxuries they couldn't afford with money they didn't have - the loans could not be refinanced to a lower interest rate as the value of the property became less and the non-pmt of other loans lowered the credit-standing of borrowers.

Add to that rising oil prices coupled with war expenses and it's a perfect recipe for financial disaster - rising oil prices stretching the already-stretched wallets of consumers even more! This led to less spending in the stores and lowered profits of the businesses.

But, why are global markets falling? Cash strapped, the American financial institutions are forced to withdraw funds and book profits in other markets to show improved bottom-lines and prevent their stock prices at homes from tanking further!

Next question is - why is INDIAN market falling so much? One reason is what was mentioned above - but India should not be so much tied to the US... Indian economy is still strong. India needs to break the shackles, but it can only do so if China re-evaluates its currency, because then rest of Asia can do the same. India stands to gain a lot from it as dollar will weaken further and even though its bad for exports - it'll help India's imports as import costs will go down, thus cutting down the Import/export deficit.

Why is a falling dollar good for America? - falling dollar will help American exports as more people over the world will buy American goods thus boosting the American economy - Sure, it will take time and it means the American people will have to work hard for some time, but having already spent the money they didn't have, isn't it time they put in the work for it?

Blame it on Bush! In his tenure, we have seen it all - A fake war without WMDs, a war on terror that has more soldiers killed than in the twin towers! (and not even counting the number of people killed in Iraq and Afghanistan, because that would be several posts in themselves). His vested interest in oil allows oil-cos to post PROFITS OF 40 BILLION DOLLARS WHILE THE ECONOMY DIES AND THE PEOPLE ARE STRAINED! Not having to deal with it as he moves out, Bush is hammering the nails in the economy's coffin!! He is who the American people should blame and not anything else. The question is - when Americans don't know what rate of interest they pay for their loans, how many will see this truth?

!! Spike !!
PS: hopefully this post will get thakurman back here :P