Road to Ruin The dot-com crash causes a brief, but fairly deep recession, and the Fed slashes interest rates to 1% (center chart). Mortgage rates are cut in half, which stimulates home-buying, and causes home prices to surge (right chart). Soon, even ordinary hairdressers are taking out mortgages on multiple houses, which they intend to 'flip' by selling a little later, for a quick profit.

	Financial Contagion Meanwhile, foreign bankers have been following the lead set by the US, slashing interest rates and goosing housing. All the big economies now have housing bubbles, and even bankers are becoming gullible. Banks that get farthest ahead of the curve, such as those in Iceland, are in deep trouble. The panic is now global. In America, the Treasury secretary quickly puts together a truly monster bailout package, with an eye-watering price tag.
	Get-out-of-jail-free The crisis subsides quickly, as the country's top banks accept a bailout from the US government that totals $700 billion. Congress follows with an even bigger stimulus package. The country is initially stunned by the price tag, but the next shoe never drops. Instead, the smoke clears quickly, as the Fed pushes interest rates all the way down to zero. This defies logic, implying that the cost of renting money is also now zero. Money is essentially free, and America is now hooked on easy money.