Near where I live (Norwich, Norfolk, UK) there is a pleasant village with a pretty decent collection of new homes (the site has been developed over the last 7 years). About 4 years ago, while in the process of selling my London terraced house for a silly sum and moving to the country, I got details on the houses being developed. One in particular caught my eye - it was pastiche vernacular (which, for my sins, I love) and was way out of my league at £480,000. I liked it so much I kept the details (for day-dreaming).

That same house is now on the market for £320,000 (before the buyer starts negotiating) a fall of some 35% (which might indicate how far behind the curve the official figures really are). However , and here’s the kicker,using an online calculator I have tentatively worked out that if you bought it as a buy-to-let investor you would still be losing money because the going rent on similar properties would not cover the mortgage with a 10% deposit (even if house prices were rising by 3% a year).

Which might indicate that prices have even further to fall. In fact, a friend who has been a successful buy-to-let investor told me that she could only make it break even at about £240,000.

The desperate nature of your tone makes my day. Thanks.

Let let me clarify. The point of my post is not what economic system fail, but will lessons be learned. I pointed out other countries have learned their lessons and have benefited. The US is nowhere near learning anything yet. But we shall see in 2009.

Oh yes I am a capitalist! But of course there are many forms of capitalism - each nation adjust things to fit their needs. The US adjusted things to fit its needs too - which is now universally recognized as laissez fair casino racketeering for the elites and screw the rest. To correct the USA’s profoundly and systematically corrupted ‘capitalism’ (which suddenly turned into neo-stateism to save the skins of the elites in power) is impossible without a generational national upheaval. It is like: How do you fix a guy like Madoff and turn him into a Warran Buffett, multiplied by a 100 million times? Isn’t that the essence James Saft column?

“How does it feel?” (Thank you, Bob Dylan.)

You know, that nasty mathematical concept called “The Power Function”?

The most important mathematical concept in the universe - bar none.

To put this in perspective, 12% a year return means that in 30 years (a reasonable investment horizon) you would have THIRTY TIMES your original investment.

It is this sort of utter nonsense that led to the Internet bubble, the Housing bubble, and now we’re going to do the Treasury bubble!

I wrote about this in my blog (the web site above) this morning and in fact posted several articles on it over the weekend.

THERE IS NO UNICORN THAT EJECTS SKITTLES FROM THE “BUSINESS END.”

If you want to know how bad the exponential function gets, simply figure out how many people you end up with if you start with 1 million in a city and a 4% growth rate over 100 years.

Answer: FIFTY MILLION. Will they fit?

The author is correct in that “we’re all Madoff”, but then again, so is our government and so are our markets.

The ONLY way to clear the market is to force the insoluble debt into the open and DEFAULT IT. Everyone is trying to find a way to avoid this, but mathematics say that it CAN’T be avoided.

We tried in 2000-03 and all we did was make the inevitable crash three times as bad. Now we’re facing it again and EVERYONE wants to put it off AGAIN.

Folks, either we do it this time or, if we keep this up, we will risk destroying not just a lot of jobs and having a depression, but destroying our political system as well.

Let’s not go there, ok? I like my nation and will suffer an INEVITABLE Depression (even if three times as bad as it would have been if we had accepted it in 2000) to avoid political and economic collapse.

we’ve all been not only wanting, but demanding the right to live like nobility based on income we don’t have, borrowing money we can’t repay, and deluding ourselves from the fact that a share of stock is only worth what you eventually sell it for.

Now, like spoiled children who’ve been told our tummy aches are our own fault, we want to scream at anything sounding like an adult voice, even when the adult voice is saying, “the boat’s sinking, shut up and help bail!”

Banks have traded bad credit card back and forth to pretend profitability for decades hoping the house of cards would never collapse, and we have an economy running wild and driven by college kids who see no harm in driving up the cost of many things under the weight of consumer demand, knowing they have no money…just plastic.

We’ve had years of the “bigger idiot theory”, with everybody hoping a bigger idiot would buy what we bought as a stupid price for a idiotic one.

Corporations got too caught up in making sure to report profit at any price to their future, politicians have juiced statistics and manipulated reality, while American workers can’t compete with somebody making $5 a day.

And American workers who blame everybody but themselves gladly spent the 60s, 70s and 80s refusing to pay for American made products with no regard to lost jobs (until the domino finally fell on their own head).

We have a consumer economy with no consumers, and until we recreate working wages, coupled with corporate AND personal fiscal responsibility, deflation, monitization and public works projects may save the country and government, but we will avoid becoming a second rate nation state by sliding directly into the gutter.

China can’t keep loaning us money to buy their unsafe, cheaply made products forever. Even they will eventually demand cash. And not American Dollars, cash that has value and the ink is dry when it hits their hands.