[finance] for the economically ignorant like me

Interesting little article on the Fed’s continued low interest rates:

In an effort to preserve US consumer spending, the Federal Reserve lowered interest rates; the administration of President George W Bush lowered taxes, and Asian policymakers kept their currencies artificially weak to subsidize exports to American consumers.

These policies have led to one of the longest booms in consumer spending ever - US consumer growth has not been negative since the early 1990s. However, it is credit expansion, rather than increased purchasing power, that has fueled the growth.

Hedge funds and the issuers of credit derivatives seem to be most into this phenomenon. European Central Bank president Jean-Claude Trichet, at the World Economic Forum in Davos, Switzerland, warned that the explosion of credit derivatives is a risk to the stability of financial markets. Specifically, he complained that the market underprices its inherent risks.

You don’t have to be an economist to understand this – credit is fuelling the boom, maintaining it, to be more correct. And when the plug is pulled further down the track? I have a document before me, from 2001, predicting that the finance is going to call in credit debt when they feel the societal controls are at last in place and they are ready to create a crisis. Is this one reason why George and Tony are so hell-bent on removing citizen’s freedoms, e.g. the FoI Act?