Continuing with discussion about U.S./China game of chicken, the credit derivatives market has recently been showing signs of cracking. Part of what's been going on for years is that with Greenspan trying his hardest to keep things from getting too bad, keeping rates too low for too long has created one of the great carry trades in history. With the fed funds rate below the inflation rate, thus a negative real rate, institutions have been able to leverage billions off the short yield to chase longer, higher yields. Also, this low real rate has greatly fueled the housing bubble.

The lack of salary growth over the last few years has prompted consumers to turn to the easy money obtained by extracting equity from their inflated home values -- to the tune of $700+ billion since 2000. The result: household debt is at a record 90% of GDP. When (if) things finally do break, it will be the American consumer that gets KO'd on the chin.

Bush/Cheney have strongly endorsed and communicated not just an ownership mentality but more so a spend and consume mindset, one that is completely free from notions of conserving and some self-sacrifice. Yes, the ownership mantra is a wink-wink to keep the daisy-chain of housing excesses in full motion, but tax breaks during war, the bloated spending, the no-mention of conserving (instead, snide poking fun from Cheney) -- they all send a consistent message to the naive and vulnerable public. Bigger houses, bigger autos, bigger meals, etc., and at any cost, even if it requires borrowing.

Anything to live like the well-to-do....because we're all above average, right?