AS GOES HOUSING SO GOES THE ECONOMY

"Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit.

The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move."

Yahoo

So now the government has managed to exhaust the first time home buyer market by redistributing wealth. They've done the same thing with the auto industry. What else can they prop up to artificially enhance the economic outlook?

Really nothing else will have the impact of these two industries. They are the last great vestiges of manufacturing in this country. Without them all we do is shuffle money around and sell electronic crap made in Asia. The service economy just isn't sufficient when no one can justify spending the little money they have on $50 haircuts and $5 coffee.

As the economy unwinds what will happen to all of the people with degrees that can't do anything useful? They've built their lives around the idea that it was possible to earn big money while producing absolutely nothing. And that worked for awhile. But, without the engine of a solid manufacturing base to create the wealth needed to power it the service world was doomed to failure. Somehow, even with all our education, the average American couldn't understand that. We were perfectly happy to see the dirty work sent off to some foreign country where third world slaves could produce our toys at the cheapest possible price.

We created the worlds largest Ponzi scheme. Like all Ponzi schemes the guys that got in first made big money. And just like all Ponzi schemes eventually the energy required to support it was diluted to such an extent that it could no longer survive. That energy was manufacturing.

So now we have a glut of managers with no one to manage and salesmen without customers. We've destroyed our manufacturing base so we can no longer create wealth. We hoped to become the worlds middleman, sucking profit off of transactions between buyers and sellers around the globe. But then the buyers disappeared.

Because we put all of our manufacturing eggs into cars and houses all the tradespeople ended up there. Now that those industries have collapsed we've got millions of skilled people with nothing to produce. Without diversification in manufacturing there is no industry that can use their skills. The last part of the productive middle class sits idle, with no real hope of any return to the wages they have grown accustomed to.

Without millions of us out there making a solid income the managers and salesmen had better come to grips with the fact that their way of life is over, too. The energy that supported our grand Ponzi has disappeared, if not forever, for a very long time. And with it went the engine of consumption. The American middle class has driven the growth of the world economy. Without it the system collapses.

The depression is here regardless of the happy talk on TV. This will dwarf the depression of the 30's in both scope and scale. We've got a lot farther to fall this time. And we are far less prepared and able to cope.

Pray for protection for your family and the people of the world. We're all in this together.