Tuesday, August 14, 2007

The Story Of Uncle Sam - Part 3

With interest rate at the decades' low of 1%,the Federal Reserve in actual fact was pumping huge liquidity into the market and making the funds extremely cheap. In short, borrowing cost couldn't be any lower, and Americans had no reason not to smile their way to banks to take up offers.

The superliquid market triggered off a bull run on the American residential house market, making it lucrative to speculate in houses by borrowing cheap funds. A lot of speculators joined in to a frenzied chase for wealth in house market.

The superbull roared in a stretch of six years from 2001 to 2006, making all house owners hilarious as they watched the house price index inching up day by day.

The appreciating residential properties saved the United States, and the world, from going deep into recession following the IT bubble burst. In fact, this was one of the shortest recessions that U.S. ever experienced in history - for a reason none other than the rising house prices. Another equally important factor was China.

Uncle Sam was more than happy to see the value of his house shooting up to sky-high.

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