This administration, and also our Congress, it must be said, are responsible for this state of affairs; both the Republicans until recently, and now the Democrats, have allowed this to happen. The administration for entering into an absolutely disastrous war, which has not only drained out resources and treasury, but actually has been fought on borrowed money from China, and also alienated so many people and governments throughout the world that any goodwill we might have expected to shore up our currency as we might once have expected as the world's most powerful country and leading currency, has essentially evaporated. Congress is to blame because it has spent like a drunken sailor on shore leave with an unlimited credit card over the last 7 years, and the Democrats have done nothing to really stop it, even though they must know the damage that has been done to our country's coffers from the years of huge deficits under this Bush administration.
Add to this, the crazy situation we have had where the housing "madness" over the last few years, where property values were rising beyond sustainability, and loans were being made that could not be repaid if the rise ever stopped, which it inevitably did, of course, and during this period of "economic growth" fuelled by borrowing against the value of rising house prices, because despite increased productivity, true wage increases were not happening for the average person, except the already very rich and overpaid CEOs, and you had (and have) a recipe for economic disaster.
The prices of basic foodstuffs in the stores are rising almost every week, as fuel prices climb steeply and shipping costs escalate; the possibility is very real that we could go into one of the worst economic downturns in our history!
If the Fed lowers interest rates again (as it surely must, and will, to try and stave off a real downturn here) it will be the worst of all possible worlds. The lower interest rates will lower the value of the dollar further against the euro, especially since the Europeans have no need to lower their own interest rate, and when the dollar collapses even further, the inflation rate will explode as we rely so much on imports of everything from fuel to food, to clothing and computers and electronic goods. The result? Stagflation! (A stagnant economy, with inflation.)
Pity Fed Chaiman Ben Bernanke. He knows what's happening. He's printing money to try and stem the credit crunch brought on from the subprime mess, and at the same time he knows it's not working, and he knows that every cut in interest rates to try and shore up our shaky economy actually puts another nail in its coffin!
2008 isn't looking too good for this country. We really are on the brink of a possible melt-down like Argentina a few years ago.
America will survive, but it will be owned by the Europeans, the Chinese and the Indians (all of whom are buying companies here really cheap, and cheaper by the day), and for the next two years we all might well be on the rocks financially.