(I remember asking in a previous thread "where is all this money coming from" and nobody answered. Here's the answer)
http://globalresearch.ca/articles/ENG407A.html
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The US Home Bubble
The official US myth is that the recession of 2000-2001 ended in November 2001 and "recovery" has been underway ever since. The reality is not so positive. Using record low interest rates, the Fed has lured American families into debt at record rates, creating what might be called a "virtual recovery," financed by record amounts of new consumer debt. There has never been a recovery before in which debt levels increase, rather the opposite.
The American dream of owning an own home has been the source of the record lending, helped by the lowest interest rates in 43 years. Greenspan has often boasted this has been what has propped the US economy since 2001. When families buy a home, they need furniture, they employ construction workers, electricians, engineers, and the economy grows. Record low interest rates have made it very easy for families to get a bank loan, using their home equity as collateral or guarantee. These loans, tied to the rising real estate prices, allowed American families to finance new furniture, cars, and countless more. In 2003 banks made a record $324 billion in such home equity loans, on top of $1 trillion in new mortgage loans.
All this economic consumption has created the illusion of a recovering economy. Behind the surface, a huge debt burden has built up. Since 1997, the total of home mortgage debt for Americans has risen 94% to a colossal $7.4 trillion, a debt of some $120,000 for a family of four. Bank loans for real estate purchases have risen since 1997 by 200%, to $2.4 trillion. Average US home prices have risen by 50% in the period since 1998. In 2003 alone a record total of $1 trillion in new mortgage loans were made. In 1997 mortgages totalled $202 billion.
In many parts of the US, home price inflation has become alarming. An apartment in Manhattan is now above $1 million. Home prices in Boston have risen by 64% in five years. California real estate prices are soaring. On average US home prices have risen 50% in six years, an unprecedented rise, driven by Greenspan's easy credit. In seven years to 2004, prices of US homes had risen on paper by $7 trillion to a total of $15 trillion, the highest in US history. The problem is so obviously dangerous, that Greenspan recently was forced to deny existence of any real estate "bubble," much as he denied a dot.com stock bubble in 2000.
But that is exactly what he has created with his low interest rates. The dot.com bubble has been transformed into a larger and more threatening real estate bubble. Families have been convinced to invest in a home as an alternative to buying stocks for their pension years.