The decades' low borrowing cost, coupled with escalating house prices, gave Americans irresistible incentives to remortgage their residential properties.
Despite the slow-down in economy due to the burst of IT bubble, the households could keep up with the lavish spending - all because of the massive appreciation in houses that propped up the domestic consumption.
Take the case of Uncle Sam - in spite of his dwindling personal income, he could sustain his extravagant life -style by refinancing his big house.
Household consumptions constitute roughly 70% of the United States' GDP. Thanks to the surging house prices - they made it possible for the American households to go on spending to save the weakened economy.
When the consumers salvaged the American economy, they also propelled the whole world to recovery for a very simple reason - the United States is the world's largest export market. In short, it was the world's single engine of growth.
4 days ago