“Will the next 10 years be as nice as the past 10?” asked Britain's governor of the Bank of England yesterday. “Will the great stability continue?”

Not waiting for an answer, Mervyn King had his own: “That seems rather unlikely.”

Columnist Alex Brummer comments in the Daily Mail:

“A sharp deterioration in the nation's international trade together with the catastrophic slide on the high street [translation into the American tongue: A fall in retail sales] could mean that a period of 52 quarters of consecutive growth is drawing to a close.”

Last night, at a restaurant in South Kensington, there was no sign of it. Every table was taken at Lundum's - a fashionable eatery with a Danish motif. Diners put down trendy portions of gravlax, beef stroganoff and other Baltic specialties, apparently unaware that their world of money shuffling from nine to five during the week, and then weekends off to Spain or Scotland was beginning to wobble. House prices are going down in London. And according to recent figures from the British Retail Consortium, shoppers are either running out of money, or having a temporary bout of sanity.

Britain has always been ahead of America. The Industrial Revolution began in England before making its way over to New England. England took the lead in empire, too - extending its control over much of the world, while America still minded its own business. Unionization began in Britain, and social welfare legislation, too.

We Americans have always admired the English. We lived in plain wood houses out on the prairies or backwoods; imagine how our heads turned when we saw Westminster or Buckingham Palace! We butchered savage tribes out on the frontier; imagine how we envied Wellington! We ruled from sea to shining sea; Britannia ruled the ocean waves themselves, and almost everything they touched!

American statesmanship - certainly under Wilson and Roosevelt - was often nothing more than a fawning imitation of the British. Where the English went, Americans followed. And when Roosevelt went to create his New Deal, all he had to do was to look over his shoulder at his English cousins. Neville Chamberlain began picking taxpayers pockets with his “Widows, Orphans and Old Age Contributory Pensions Act” in 1925.

A property bubble began in Britain in the late ‘90s. America's property price bubble did not begin until five years later, but house prices on the sceptered isle have been on a gentle decline for several months. And now the threat of recession is making its way to the lips of the Dr. Mervyn King and the pages of the Daily Mail.

Can the Wall Street Journal be far behind?

Average house sales prices in Manhattan fell in the last quarter by 13%, explains a news item. At the top end, the decline was 36%. On the other coast, sales in San Diego fell 4%.

Could this be the beginning of something big?

We don't know, but we will find out.

*** So we return to Dr. King's question: Will the next 10 years be as stable and as nice as the last 10?

We have no sure answer, but we have a guess. The world advances by fits and starts; in endless cycles of growth, correction, boom, bust, innovation and destruction. One success leads not to more successes, but ultimately to more failures, since life cannot follow life. Death follows life, and then life again. One business has to go broke so that a new industry can flourish. One tree has to fall so that the small seedlings beneath it will get the sun. Everything in nature - including markets - are self-limiting, and self-correcting.

Mr. Greenspan seemed to have this natural cycle in mind when he cautioned central bankers at Jackson Hole last month. The silver lining he drew out by successfully stabilizing financial markets for so long seemed to have a cloud wrapped around it. Investors, and homeowners, took stability as a fact of life, and current market conditions as permanent. Why not borrow, they said to themselves? There will always be jobs, plentiful credit at lower rates, and higher asset prices. You'd have to be a fool not to buy a house on these terms.

On a website this morning, we saw an advertisement: “$150,000 Mortgage - Just $483 per month!” A man with $1,500 of free cash flow available could borrow $450,000 - about the average cost of a house in California in 2003. A year later, he had about $100,000 in “equity”. What was his investment? He had to live somewhere. He had merely “rented” a $450,000 house for $1,500 a month. His investment was zero.

Thus has the entire nation been lured into debt like a teenager into a free strip show, knowing that it can't help but be interesting.

But why cannot the next 10 years be just the same? Because once the man has committed his $1,500 - he can buy no more. Sales grow sluggish. Inventories build up. Eventually, prices fall...as fellows decide to take their winnings off the table.

*** Some $88 billion of corporate debt is “on the brink,” says a Bloomberg report. Hertz, Clear Channel and 616 other U.S. companies are in danger of having their corporate bonds downgraded to “junk” status. Of course, they will be in good company. Many of America's largest and most prestigious brand names are now junk - Sears, G.M., Kodak. G.M. bonds are rated BB, meaning they are two levels below investment grade.

“Business bankruptcies to rise 30% in third quarter,” adds a headline from the L.A. TIMES. Not since the Great Depression has so much corporate debt been such poor quality.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.