Its not bad enough that America’s standing around the world has been severely downgraded by the Iraq War. Now the global slowdown and credit crisis is squarely being pinned on Americans because of their years of living high on the hog, thanks to credit cards, and huge cheap home loans available to anyone with a pulse. The US is really the only country that borrows so heavily against future earnings. To even talk about the size of the national debt, or the size of personal debt in the US appears ludicrous. The numbers are astronomical.

The secured debt (mortgages, car loans, home equity) has now gone bad as house prices have fallen on average some 30% from their peak. Families are walking away from their primary homes in droves as a bottom has yet to appear. There are perhaps a trillion in mortgages alone in California alone that need to be re-bucketed. The car lease business has collapsed as cars coming off leases cannot be sold anywhere near the value car dealers thought they would get at the end of the lease. The next and final leg of the collapse will be credit card defaults. This unsecured debt will usher in the next phase in the credit crisis. As one hot dog vendor said, “my business is down because people want to pay with credit cards and I only take cash”.

The casino mentality in America has led to the crisis in confidence in the credit markets. This will not end well for most people, and yes the rest of the world will pay the price too. The House is finally getting its pound of flesh from these gamblers and don’t look for this to end in 2009. I suspect that once home prices bottom out, somewhere around 40-50% below their peak, we will not see much movement in home prices for at least 4 years. Without cash not much will happen for Americans going forward so look for some very good deals on cars, boats, homes, and anything else that can be sold for cash in the US.