The credit crisis in America has become very prominent and severe which can be a threat to the US economy. This type of the credit crunch in American market has boosted up the augmentation in the pace of the downfall in American house prices because the mortgage lenders preferred to check the accessibility to the borrowing and increased interest rates whereas some economists opine that the crisis can hasten the occurrence of an economic recession.

This type of premonition of the economic recession was considered to be an important political matter for the Bush administration. In his annual report State of the Union address in January, Bush said that the American economic infrastructure would be in full bloom. On the contrary, his opponent party took strong exception to his expectation pointing out that due to the low rates of taxation and higher tendency towards the government’s high expenditure would minimize the possibility of the enhancement of the country’s economic infrastructure. They also lambasted Bush government’s wrong decision and the poor statecraft.  American trade deficit touched a record US$763.3 billion in 2006, an increase of 6.5 percent over the last year. This is the updated statistic done by the US Census bureau.

On the other hand America’s trade deficit with China touched US$232.5 billion in 2006 and it was the source of growing trade confrontation between the two nations. Furthermore, the adverse impact of the American blitzkrieg operation in Iraq and Afghanistan brought the US economic infrastructure on the verge of the destruction and downfall. This type of the military expenditure has enhanced the possibility of the American credit crisis in the global market. According to Greenspan the former Federal Reserve chairman, there is higher possibility of the ending of low interest rate and low inflation due the US credit crisis.