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Some people here point to the spending spree Americans have been on for the last few years as evidence of some underlying strength in the American economy. It may be just the opposite.

If you look at a 50 year graph of home equity, you see that Americans had a considerable amount of it until about 1996, when the graph line on removal of equity from homes heads up like a NASA launch. If you look at the rate of personal bankruptcy, you see frightening numbers. When you look at personal savings rates, you see historic lows. When you look at our current international account, you see we have gone from being the largest creditor nation to accounting for a supermajority of world debt. Combining our trade deficit and federal deficit, both of which foreignors have been financing, we have been pumping about $750 billion per year out to the world. That's why the dollar has fallen steadily for three years against all major currencies. This year our trade deficit alone will be about $800 billion.

Foreignors are tired of funding our spending spree. The central banks are announcing one after one that they will "diversify their holdings." Translated, they are dumping dollars and dollar denominated assets. OPEC is starting to dump dollars and buy gold. The amount we pay out in debt service to the rest of the world is going up year after year, and faster than our economy is growing. The day of reckoning is near.