Get Ready to Tighten Your Belts

We've been fretting for a while now about an inevitable economic meltdown in the U.S. as a result of the horrible economic policies of the Bush Administration. By all standard textbook measures, were it not for the rest of the world using its surplus cash to buy U.S Treasury bonds which pay the interest on the national debt, we would already be in an intense depression. However, the surplus is drying up, the dollar is falling, and the treasuries of other nations are gradually looking more attractive than ours. Eventually someone (Europe? China?) is going to start shopping elsewhere, forcing the U.S. Treasury to jack up interest rates (to stay competitive), thus kickstarting a spiraling economic meltdown (probably starting with the housing market). The fact that much of the world no longer gives a shit about us, thanks to Bush's isolationist/imperialist policies, isn't going to help. Ian Welsh gives a nice, jargon-free explanation of what may likely happen in the next year or two, and it doesn't look pretty.

My advice to you if you recently bought a house with a variable rate mortgage and you have no savings: sell now or refinance with a fixed rate if you can afford it. Prices are still high and rates are still low. Every single reliable econimic indication and every single reputable Nobel economist are saying the same thing: we are on the verge of an economic downturn.