The current spiral of the United States economy can be attributed to several factors. Of these, high gas prices, the Federal Reserve lowering interest rates, and sub prime mortgages are key contributors.
With gas prices at an all time high, it is no surprise that consumers are buying less. They are spending more money just to get to work every week, and the thought of using excess gas to go on vacation or a shopping spree is enough to make you shudder.
The Federal Reserve also plays its part in the weakening of the US dollar. Trying to avoid another bank scare (everyone withdrawing their money out of the bank at the same time) the Fed is lowering interest rates making the dollar worth less. Not worthless, but worth less.
Finally, sub prime mortgages were a big influence on the current downturn of the dollar. Basically, sub prime mortgages are to help people with less than great credit buy a house. They were also developed to help those who didn’t make quite enough money to substantiate a prime loan for the amount the house they wanted was worth, so they are offered a sub prime loan, at a higher interest rate, for more than they would have qualified for a prime loan.
While this sounds like a great idea, the problem happens when the interest rates go up, and they did. There were many people whose salaries could not cover the cost of the higher interest rates and so they foreclosed or simply walked away.
It does seem like the economy could be headed into recession, but it is not for certain yet. As with most issues dealing with money, it is a game of wait and see.
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