Everyone should know why we are in the financial 'doldrums'. We all shared in the up-side; and we will all share in the down-side. Please check out the excerpt below. This is the most down to earth explanation of why we are where we now find ourselves. Good read! 

As Americans have carried home mountains of goods manufactured in Japan, China and elsewhere, they have sent trillions of dollars across the Pacific to pay for them. Asian central banks have taken these winnings and parked them back in the United States, buying up Treasury bills, stocks and property. In so doing, they have kept American interest rates low and the dollar stronger, ensuring that consumers have the wherewithal to keep buying.

Asia’s export-led prosperity has in turn generated business for American firms. As China erects factories, office towers and modern airlines, it is snapping up construction equipment from Caterpillar, airplanes from Boeing and engines from Cummins.

Cheap credit has fostered another development that was crucial in creating the current state of things: It unleashed a wave of mortgages with exotically lenient terms, such as interest-only payments and no money down. That allowed buyers to take on more expensive homes than they could have otherwise afforded. As home values rose much the way dot-com stocks had a decade earlier, banks offered loans and no-fuss refinancing that allowed homeowners to turn increased value into money. From 2004 to 2006, Americans took more than $800 billion a year out of their homes, according to most estimates.

With prices now plummeting and banks savaged by mortgage losses, this artery of credit is drying up. The American consumer, a crucial engine of growth for the global economy, may finally be tapped out.

With recent history as a guide, many argue that the Fed and other central banks need simply step in anew, cut interest rates and send Americans back to the mall. Except a new force preoccupies those who control the credit taps: Central banks in the United States and Europe fear inflation, particularly as oil prices soar. This makes them reluctant to bring interest rates down much more.

Where foreigners have in recent years been content to keep buying American debt with the proceeds of the money they earn by selling us their goods, that is now changing. As the dollar keeps falling in value, China has sent signals that it plans to put more of its savings in the euro. Petroleum-rich countries such as Kuwait and Russia, swimming in dollars as the price of oil climbs, have been buying more euros and other currencies, too, adding to the downward pressure on the American currency.

So, for better or worse, Americans and countries whose prosperity is tied to Americans’ spending are apparently headed into uncharted territory: We are about to find out what happens when the easy money runs out.