By Emily Kaiser - Analysis
from Reuters

WASHINGTON (Reuters) - Credit spreads and collateralized debt obligations may not mean much to the average U.S. consumer, but if market gyrations persist, Wall Street’s pain may come home to hurt Main Street.

Consumer spending, the driving force behind the U.S. economy, has slowed in the past few months, although it did prove remarkably resilient through a series of gasoline price spikes and the early stages of the housing market slump.

Easy credit terms have underpinned that spending, and this week’s wild ride in financial markets shows how deeply the global economy depends on that free-flowing cash too.

The problem is, the easy money is drying up.

First it was mortgage-related markets where credit tightened as home prices fell and subprime mortgage defaults hit a record high.

The root of the problem can be traced back to U.S. home loans made to people with poor credit histories. But it became a global market problem when the investment community bundled those loans and sliced them up into risky, riskier and riskiest pieces that were resold to investors such as hedge funds and banks.

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