According to the neo-conservatives, the American dream seemed a reality. Money lost its value. What was important would be credit. 'Yours with no money down,' 'Buy a car and your home appliances now, and pay for them in five years.'

This orientation brought with it a buying boom of large homes, luxury cars, expensive vacations and many other signs of wealth that in realty were unsustainable pompous illusions destined to collapse.

The first signs of the disaster came when a large number of people fell behind on smaller loan payments; credit they received almost miraculously considering that their payments were way beyond their income, and based on poor credit references. However, the matter has now been felt on Wall Street.

In his article Pay It off Later: Debt Is the New American Dream published in the Vancouver, Canada magazine The Tyee, Dee Hon, award winning researcher on economic issues, explains how the situation got to where it is.

'How did it come to this? How did America, collectively and as individuals, become a nation addicted to debt, pushed to and over the edge of bankruptcy? The savings rate hangs below zero. Personal bankruptcies are reaching record heights. America's total debt averages more than $160,000 for every man, woman, and child. On a broader scale, China holds nearly $1 trillion in us debt. Japan and other countries are also owed big.

'The story begins with labor. The decades following World War II were boom years. Economic growth was strong and powerful industrial unions made the middle-class dream attainable for working-class citizens. Workers bought homes and cars in such volume they gave rise to the modern suburb. But prosperity for wage earners reached its zenith in the early 1970s. By then, corporate America had begun shredding the implicit social contract it had with its workers for fear of increased foreign competition. Companies cut costs by finding cheap labor overseas, creating a drag on wages.'

'Even as wages fell, consumerism was encouraged to continue soaring to unprecedented heights. Buying stuff became a patriotic duty that distinguished citizens from their communist Cold War enemies. In the eighties, consumers' growing fearlessness towards debt and their hunger for goods were met with Ronald Reagan's deregulation the lending industry. Credit not only became more easily attainable, it became heavily marketed. Credit card debt, at $880 billion, is now triple what it was in 1988, after adjusting for inflation.'

'This is all great news for the corporate sector, which both earns money from loans to consumers, and profits from their spending. Better still, lower wages means lower costs and higher profits. These factors helped the stock market begin a record boom in the early '80s that has continued almost unabated until today.

'These conditions created vast riches for one class of individuals in particular: those who control what is known as economic rent, which can be the income 'earned' from the ownership of an asset. Some forms of economic rent include dividends from stocks, or capital gains from the sale of stocks or property. The alchemy of this rent is that it requires no effort to produce money.

Governments, for their part, encourage the investors, or rentier class. Economic rent, in the form of capital gains, is taxed at a lower rate than earned income in almost every industrialized country.'

'Given a choice between working for diminishing returns and joining the leisurely riches of the rentier, people pursue the latter. If the rentier class is fabulously rich, why can't everyone become a member? People of all professions sought to have their money work for them, pouring money into investments. This spurred the explosion of the finance industry, people who manage money for others. The now-$10 trillion mutual fund industry is 700 times the size it was in the 1970s.

'Cheap borrowing costs encouraged millions of Americans to borrow more, buying homes and sending housing prices to record highs. Soaring house prices encouraged banks to loan freely, which sent even more buyers into the market -- many who believed the hype that the real estate investment offered a never-ending escalator to riches and borrowed heavily to finance their dreams of getting ahead.'

And that’s how, in the judgment of economist Dee Hon, the current subprime mortgage crisis in the United States came about and nobody dares yet to say where it will lead.

From Daily Granma