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It's clear, US in a financial crisis
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For ordinary Americans, though, it has been a different story. Real wages have been growing slowly; at just 1.6 percent a year on average over the latest upswing, well down on the experience of earlier decades.

Business, of course, needs consumers to carry on spending in order to make money, so a way had to be found to persuade households to do their patriotic duty.

The method chosen was simple. Whip up a colossal housing bubble, convince consumers that it makes sense to borrow money against the rising value of their homes to supplement their meager real wage growth and watch the profits roll in.

As they did for a while. Now it is payback time and the mood could get very ugly. Americans, to put it bluntly, have been conned. They have been duped by a bunch of serpent-tongued hucksters who packed up the wagon and made it across the county line before a lynch mob could be formed.

The debate now is not about whether the US is in recession but how deep and long that recession will be. Super-bears have started to say that this is perhaps "The Big One", by which they mean the onset of a new Great Depression. The need to rescue Bear Stearns has done little to still those voices.

As the economics team at HSBC recently pointed out, there has been a "catastrophic breakdown" of trust, and when that has happened in the past the US in the 1930s, Japan in the 1990s chucking extra money at the banks in the hope that they will start lending again proves ineffective.

It is not hard to see why trust has become such a rare commodity: Wall Street at the height of the securitization mania had, in effect, become London at the time of the South Sea Bubble crisis in 1720.

Vast quantities of funny paper were changing hands even though those involved in the deals had no idea of their true worth. Nor did they care.

Inevitably, now the bubble has burst and the huge Ponzi securitization scam has been exposed, there has been a reaction.

The securitization market is dead, there is less money sloshing round the system, banks are hoarding their cash.

Having allowed the housing boom to rage out of control for too long and then delaying cuts in interest rates until the housing market was gripped by recessionary forces, the Fed is now trying to make up for lost time with a burst of hyperactivity. It will cut interest rates and keep cutting them: financial markets expect the Fed funds rate to be 1 percent by the summer, and they are probably right.

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