The heat has came down on London recently like a hot iron. It has taken the wrinkles out, and left the whole city as flat and limp as an old pair of pants.
We walked along the river in Southwark and sat down on one of the benches looking out towards Charing Cross station on the other bank. The water was low. Everyone outside shuffled along like a sluggish tide. Lines formed to get into restaurants. Pushchairs bumped into each other. Out on the river, a party was taking place on one of the tourist boats; the sounds of a jazz saxophone floated down the river like litter.
All of a sudden, we felt the same odd sensation that we recall from the late '90s...the fin de bubble feeling...that too many people were enjoying themselves too much. We sat down at a sidewalk cafe where you had to serve yourself. The two of us each had a salad and a glass of white wine. The bill came to £26 - or nearly $50. Our modest bachelor pad in a nearby building costs over $3,000 per month. Elizabeth is looking for an apartment; she believes it will cost nearly $15,000 per month to move the whole family to London.
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Where do people get so much money, we wondered? But that too is a typical fin de bubble hallucination - that money will always be there when you need it.
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Americans have delusions of mediocrity. This is a point we made before. We make it here again, because the things that were extraordinary a year ago are even more extraordinary now. Things that would have been taken for absurd a generation ago are now taken for granted. And things that are so preposterous they invite ridicule.
As a bubble expands, the celebration that began as a little cocktail reception turns into a wild party, with guests dancing on tables and throwing up outside. Soon, it gets out of hand.
At the end of a bubble, the delusions and distortions swell up to grotesque proportions. People seem ready to believe anything as long as it fits their own fantasies. The hallucinations become so extravagant that they blow up.
The Economist, for example, recently reported that 'A recent survey of buyers in Los Angeles indicated that they expected their homes to increase in value by a whopping 22% a year over the next decade. This would put the median price per house over $3 million. At current increases in income, the median family will only have $54,535.'
How is a family earning $54,535 going to buy a $3 million house? Even if the whole thing were financed at 5%, it would still mean monthly payments of $12,500, or nearly three times total monthly earnings. Can it happen? No. It is close enough to impossible that it can smell what it had for dinner. Only a fool would bet on it. And yet, it appears that millions of people have not only taken the wager - they have staked their entire financial futures on it.
At a certain point, the logic of a bubble is the logic of self-destruction. People do stranger and stranger things, not because they are trying to avoid their own ruin, but because they are trying to bring it on.
The Daily Mail is more often than not a wealth of grist for our mill: in a recent article the paper tells the story of Mr Mark McDonald, 43, of Norfolk. The poor man suffered what the paper called 'Death by credit.' Like your editor, the man was a writer. Like your editor, he was not particularly well paid. But unlike your editor, he had a great number of credit cards. His debt rose to about £65,000 - on which he made minimum payments as long as he was able. But the burden of it got to be too great, and the father of two decided he would rather place himself on the rails in front of the 7:09 to London instead of remaining in the ranks of those living with enormous, unsustainable debt levels.
'Mr McDonald's death was the fifth known suicide due to debt in the past two years,' says the Daily Mail.
McDonald's wife blasted the credit industry: 'They are just interested in making money,' said the woman. But who isn't? And five suicides in two years seems like a small price to pay for the benefits of unlimited consumer credit. Besides, the whole empire rests on nothing more than the sand of credit. Britain's part in making fictitious wealth seem real is just that of a vassal state.
The entire US military budget - great as it is - is still less than the amount of net lending to America. Without loans from overseas, the empire itself, as we have known it, is finished.
The Daily News report had a certain fin de bubble tone to it. Twice as many people are calling for credit counselling in the UK this year as the year before, the paper noted. Twenty five thousand picked up the phone last month. For every decisive writer like McDonald there must be thousands of wishy-washy plumbers and dough bakers who can't make up their minds. They muddle through...hoping their debts never catch up with them.
By Bill Bonner for The Daily Reckoning
Bill Bonner is the founder and editor of the Daily Reckoning, a free daily e-letter. To receive more from Bill and his colleagues every day, click here:www.electricmessage.co.uk/dr
