The US economy mess canbe gigantic if not checked! The savings rates are low and more and more people are addicted to spending beyond their means! Gurumurthy writes how the USD 3.8 trillion that the rest of the world has invested in the US treasury notes and US Dollar itself may see their interests depreciating! S. Gurumurthy is a renowned Chartered Accountant and a top Corporate Advisor to many big companies and CEOs in India. Here is how the story line goes in the article..... Interest rates Go down... By repeated interest cuts, from 20 per cent to just 1 per cent in 20 years from 1981 to 2001, the US Fed got US households addicted to buying regardless of needs. At rates of 1 per cent interest, US households saw no meaning in saving. No wonder they felt justified in spending beyond their income. Savings Rates do down... The US savings rate to GDP, which was 18 per cent in 1970s, first came down to 9 per cent in 1990, then to an average of 2.8 per cent in 10 years from 1996 to 2005 and finally to a negative figure of 0.6 per cent in 2006. This drift directly led to households getting addicted to borrow and to spend. And the population addicted to spending and enjoying itself spends thoughtlessly on the credit cards... The US household dues on credit cards rose from $338 billion in 1990, when the Fed rates were around 8 per cent, to $1.5 trillion in 2003, when the Fed rate became 1 per cent. Today the dues on credit cards are over $2.46 trillion and the number of credit cards in use is 1.2 billion. The credit obligations of a US household have increased tremendously... An average American is addicted to 13 credit obligations, nine credit cards and four instalment loans! It is difficult to de-addict them today. The result, in just 15 years, US households have handed over all their money to the corporates and become indebted, like Indian farmers have. The stock market has also expanded.. but that has also seen a rise in borrowing against stocks and house equity... In 1981, when Fed rate was 20 per cent, some 5.7 per cent US households had held stocks. When, in 1990, the interest rate was cut to 8 per cent and less, some 25 per cent households frequented Wall Street, a five-fold increase in 10 years. When, in the year 2001, Fed rates were 1 per cent, some 52 per cent of the US households became obsessed with Wall Street, a ten-fold increase in 20 years. So, American current account deficit balloons - sparked by the domestic consumption. So Americans consume while the Asians save for them! Gurumurthy says that it is the US domestic imbalance that is unbalancing the WORLD! I had said almost a year back. I had said: Read more