Question: Why has the Fed allowed a housing bubble to develop? Answer: Because they didn't have any choice. The past several years of low interest rates have allowed households to extract cash from inflated property via cash-out refis, home equity loans, and sales; and to use lower interest rates to reduce monthly mortgage payments and increase disposable income. These sources of cash and savings compensated for lost wages from unemployment or underemployment. Without low interest rates engineered by the Fed, the U.S. would have sunk into a deep recession. The housing bubble is an unintended consequence. As Hague points out, "The ability to borrow $1 million for a speculative home purchase with a monthly payment of approximately $3,500 versus, say, a cost of almost triple that five years ago paints a clear picture of how this whole thing started in the first place. How many real estate investors today would or could afford $9,000 per month for the same $1 million? I think the answer to that question is easy." MORE>>

Can you remember life before $100 sneakers and $5 coffee, when people actually lived on what they earned and still had a little something socked away for a rainy day?

"People moan and groan about why they can't make do," says Michelle Singletary, author of "Seven Money Mantras for a Richer Life." "But if you look at your lifestyle, there's almost always a way to trim [costs] and make do with less." MORE>>

Among the many sordid features of America's late, degenerate capitalism is a tendency to overpay corporate executives. Top business leaders have become like sports heroes without the talent. You need not have any real knowledge of the business you are getting into...or, as Bernie Ebbers demonstrated, any real knowledge about business of any sort. So immediately, you see, we are all perfectly qualified. MORE>>

Suppose the Very Big Insurance Company sold millions of retirement policies to the workers of America. For a modest monthly premium, Very Big promised every policy holder a financially secure retirement. The Very Big Insurance Company gave each worker an individual contract and an annual statement of retirement benefits.
 
Unfortunately, Very Big's executives underestimated the cost of these benefits, and spent most of the money that had been entrusted to them. This went on for many years. Eventually, however, an auditor figured out that although Very Big had enough cash flow to cover current retirement policy benefits, it did not have enough income to cover future liabilities. The Very Big Insurance Company was headed for certain bankruptcy. MORE>>

If Rip Van Winkle had nodded off at the top of the bubble in early 2000 and then awoken today, only his outsized beard would be a tip-off that more than a night had passed. He'd be witness to a display of bullishness and bravado that's every bit as arrogant, though definitely not as ubiquitous. MORE>>

Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish. But you should hear what he's saying in private. Roach met select groups of fund managers downtown last week, including a group at Fidelity. His prediction: America has no better than a 10 percent chance of avoiding economic ``armageddon.'' MORE>>

There is an axiom in human relations that says there is always a third party motivator between two aggressive combatants. This axiom has proven itself true from the time of the Stone Age until today. The hidden third party motivator behind the Iraq and Afghanistan wars is Iran. In proper detective work, it always pays to follow the money trail and in political conflict you always try to determine who benefits the most.

Iran has had two major competitors removed from the world stage in the form of the Taliban and Saddam Hussein. Their removal was not at any cost to Iran and the Coalition of the Willing (Bullied?) took care of it for them. MORE>>

At the dawn of the 21st century, a global water crisis is looming. According to the United Nations, 1.3 billion people in the world today lack access to clean water while 2.5 billion do not have adequate sewage and sanitation. No less than 31 countries are considered to be in water stressed areas. Worldwide demand for water is doubling every 20 years, twice the rate of population growth. By the year 2025, demand for fresh water is expected to outstrip global supply by 56 percent. MORE>>

What is the relationship between Weimar Germany and Wall St. of the late 90s?   On the surface, what could be more different?  Stock market booms are the best of times while hyperinflation is a nightmare. MORE>>