namely that unlike other loans & credit lines, the interest is tax deductible. The reduction in use of that source of credit may not portend a fall in consumer purchasing, but rather a switch to other borrowing mechanisms. I don't really believe that, and for the most part agree with your line of thinking, but the point about deductible interest on loans deserves a mention.

A home equity loan is tax deductible. Therefore it is cheaper than comparable financing, like a straight ahead auto loan. The debt for a car purchase can be secured by the car itself. Alternatively, the debt can be secured with the equity in a house. If the tax adjusted rate on the home equity load is lower it's not too irrational to exercise that option.

Does this carry over into Human Resources and Employment?

Despite what G.W.Bush says about people from other countries coming here to do "the jobs Americans don't want to do," we have many thousands of well-educated, well-paid non-Americans working here. Many of these people work in Info Technologies.

If the US economy goes down, should we assume that these people will be laid off first, before Americans? How much of an impact will that have on their home countries?

Or, will American employers keep these people on, and lay off Americans instead? (We might presume that these people make lower salaries than Americans for comparable production. So American employers might prefer them over Americans.)

So, in macro-economic terms, would these people exacerbate the effect of the US economy's troubles on the rest of the world? Or mitigate it??

[Note that it may be hard to find hard data about these people, because our political leaders want to maintain the preposterous fiction that "guest workers" only do "the jobs Americans do not want to do."]

"But underlying that dynamic lurks an implicit critique of globalization. The more a country buys into the global economy, the more it loosens up controls over capital flows and boosts trading activity, the more likely it is to take a hit when the U.S. stumbles."

It also means that when the US market booms, those interrelated economies also boom ("find that stronger trade linkages lead to increased synchronization of business cycles across countries"). That doesn't seem like a critique, just an obvious consequence of integrating more markets. The busts hurt, the booms help, so unless busts hurt more than the booms help, I fail to see how this is a critique...

I agree with The F79.

Economic interdependence has always made things much more risky. But it's not an especially new phenomenon. Lack of Mexican silver to bolster China's currency markets under the Qing dynasty caused deflation, and serious economic hardship, which then preceded unequal trade deals that sucked out what little currency they had onto the world market. There are reasons for why a country would want to economically close itself off like China did under most of Mao's rule, and history is one of them.

This interdependence also blows holes in many of the paleo-conservative arguments that somehow the "Yellow Menace" wants to see nothing else but America collapse unto itself. Barring Chinese bureaucrats being extremely inept (and they're almost certainly not) no one really wants to bleed dry the goose that is laying the golden egg. A collapse of American consumer spending would be disastrous for everyone involved.

Not unlike the collapse of specious real estate loans in Japan after the bubble economy, the sub-prime mortgage bust will hurt America, and obviously all the mortgagees, big time. But will it causes a tremendous and huge disaster? Probably not. Afterall, the top portion of the income tax bracket evidently keeps getting better off, so someone will be buying the luxury goods and vanity stuff.

It is probably too obvious to mention (but I'm often surprised by what goes unmentioned and unremarked), but the real effects of tightening the purse strings of the American consumer are not linear. While each family cuts back just a bit -- stretching out that car purchase for another year or two, cutting back on the length of a vacation or distance traveled, paying down the credit card, rather than giving in to that offer of a cheap home refinancing -- the effects are multiplied downstream. Service economies are very susceptible to multiplier effects that take time to work their way through the economy. The store shelves are still full and the manufacturers are still placing orders, but the slack in the economy begins to diminish, overtime lessens, extra cash vanishes, and then the real fun begins. Credit card companies are built entirely on the notion that consumption will always increase. When the financial institutions that rely heavily on the expansion of consumption-fueled debt to boost their quarterly numbers begin to lose their grip on the consumer, they will choke on their own overzealous expectations. How will the markets react to such a convulsion?

We are only glimpsing the very beginning of the beginning of a collapse in the value of assets. But it is hard to see how this will turn out well for anyone, over the next couple of years.

I think our economy and the global economy will suffer from the effects of this current administration for years to come.

The middle class in this country is facing collapse and with that goes whatever is left of the safety nets for our children, our elderly, and our sick.

When capitalism is not tempered with compassion for the "have nots" and "greed conquers all" the forecast is dire indeed.