Wow! I think Baghdad Bob morphed into Ben Bernanke, our Fed chairman. The housing market is really starting to unravel and his catch phrase "soft landing" is starting to look more like BBQ smoke and bathroom mirrors.
Let's cut the crap. Greenspan and Bernanke know good and well what they are doing. Understand this very important economic concept: if interest rates fall too low, there is a point where people stop saving and only consume.
As the tech bubble burst, Greenspan drove interest rates from 6.5% to 2% in a year and then further to 1%. At these low rates, people have no incentive to save because interest on savings accounts falls below the rate of inflation. It actually becomes financially counterproductive to save. So people spend and spend and spend some more. That's why we've seen a negative savings rate of late.
The Fed has been complicit in allowing consumption through debt. So you allow the average household to carry an $11,000 credit card balance. You encourage adjustable rate mortgages for sub-prime borrowers because banks have excess reserves and are willing to expand their customer base to high-risk borrowers. You also allow equity cash-out's and home equity lines of credit at unprecedented levels. This is not a sustainable recovery the Fed has masterminded!
Dr. Kurt Richebacker, a former central banker, points out that in 2005 our debt loads increased at a rate 10x faster than our incomes. The most important thing I learned in school: whatever grows faster than the economy will become the economy. We are creating an economy of debt and that puts us all at enormous risk.
Folks, you always need to save. Save until it hurts. Save!