Destruction of the U.S. Economy

We U.S. citizens enjoy a magnificent and prosperous economy the rest of the world can only envy. Employment is humming along, inflation is tame, and the lines inside Starbucks (Nasdaq: SBUX) everywhere remain annoyingly long. Despite a number of hiccups this year, the stock market is still just a rock's throw from another all-time high.

But we're coming up on a bend in the yellow brick road, and going 'round it could cause the party lights to go dark quickly. That could change everything about the way we and future Americans live. Sound scary? It is.

A nation built on debt?Let's go back to the 1990s. It wasn't a bad time to be an American. Ace of Base was topping the charts, the economy was parading freely, and the stock market could make a Chihuahua look smart. With newfound wealth came newfound toys and spending habits, and a drive to leverage up to your eyeballs to fund the cars, boats, and multiple TVs for your second or third home. Since 1990, non-mortgage household debt has gone up more than threefold, outstripping economic growth and inflation.

But, heck, the amount of debt we had was not a problem! The economy kept buzzing at a pace that allowed consumers to fund their debt-laden habits. And with reasonable interest rates throughout the '90s, layering on consumption outside your earnings means wasn't that big a deal. The indulgences in spending kept going, and going ...

The music stopped. But the party's still kicking ...It wasn't until 2000 when the Nasdaq parade came to an end that the party looked like it truly might be over. With trillions of dollars of wealth purged from consumers' wallets, the economy was startled into a justified panic.

Then as the dust around the tech bubble cleared, Sept. 11 knocked us off our feet. An uncertainty we as a nation had never experienced before loomed over our heads. Federal Reserve Chairman Alan Greenspan prescribed a quick and drastic resuscitation in the form of a massive cut in interest rates to help revive the economy. And it worked, perhaps too well.

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