The country (USA), which taught the world the art and science of regulations, went wrong on its own turf. It is seeking funds from all over. Investors all over the world are feeling let down by the meltdown. Stock markets all over the world are collapsing. All forecasts about the end of the crisis are going wrong. One of the factors causing the meltdown is the home mortgages, as reported by the newspapers. The loans were disbursed without properly analysing the credit history of the borrower. During the Bush regime, investment in homes had assumed the complexion of casino games, as loans were available without too much of a hassle. Billions of dollars were staked, with the hope that big money could be made in a short period of time. The number of such loan accounts is the highest in USA. People live beyond their means. The situation could not sustain for long. The bubble had to burst. It was in mid-2007 that the problem peaked. This is the main reason behind the current crisis.

By end-September 2008, outstanding dues against credit cards were almost $1 trillion. What is more disturbing is that 5 percent of the outstanding balance is in default. The Americans had forgotten the equation concerning earnings, expenses and savings. The saving percentage reduced from 12 in the 1980s to 0 in 2004. In 2007, it reduced to -2 percent. Is it unbelievable? The amount spent on medical insurance and corporate pension funds also has been on the rise. This has worsened the current account deficit. In 1947, rich Americans earned 20 times more than the bottom 90 percent of the population. By the turn of the century the figures had drastically changed. By 2006, their earnings were 80 times more than the earnings of the bottom 90 percent of the population. The economic disparity could not have been better reflected.

The entire financial media is focused on the aftermath of the sub-prime crisis. The crisis will surely slow down growth in India, China and other emerging nations. We have to see how deep the dent will be. The spending habits in India show that there is no likelihood of the sub-prime crisis engulfing the nation. One only hopes global financial stability will be restored at the earliest and people will overcome the difficult phase with lesser pain and lower losses.

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