In today's financial news, we find what looks to us like dangerous erosion.

Stocks lost a little topsoil, under the first autumn rains. So far, the loss has been marginal. The Dow is still over 10,000 - despite huge losses in name-brand stocks and vital industries. The Philadelphia housing index, for example, is at a six-month low...falling on news of higher bond yields. Fannie Mae, the biggest mortgage finance company God ever laughed at, has lost half its value. And oil, despite widespread predictions of a price collapse, is still over $60.

In the housing market, too, we think we see the rivers running brown. The mud is washing out from under house prices. In Broward County, Florida, for example, the median price of a house dropped 2% from August to September; the backlog in unsold units rose 18%.

"Signs of economic slowdown emerge in U.S. housing market," says a Reuters article. Mortgage applications are falling. Experts predict fewer sales next year both of new and used houses.

Here in London, some streets are festooned with so many "For Sale" signs you'd think the entire neighborhood had packed up and moved to Manchester. In America, too, inventories are growing.

"It takes a lot more work to sell a house," said a realtor. It's a wonder they sell any at all. In California, only one household in six can afford to buy the typical house. Even at today's low interest rates, the $568,890 price is too much for most people to handle.

The typical household's buying power is eroding away, too. A new credit card regulation requires marginal buyers to make higher payments. If you have $25,000 worth of credit card debt, for example, carried at an annual rate of 29% (sounds unbelievable, but that's what poor credit risks
pay...) you will have to pay $855 a month, minimum, of which $605 is just to cover the interest.

Meanwhile, the poor householder is looking at energy costs that have risen 20.2% over the last year, and home heating costs expected to increase 48% this winter. His only hope has been to buy a house on credit, and hope the thing goes up enough to cover his rising debts and additional costs. But the ground is giving way beneath him. The feeble foundations of America's housing market are being exposed; when this poor householder finally takes a look at what Alan Greenspan and his economic architects at the Fed have wrought, he's likely to be appalled.

Bankruptcy filings continue to rise.

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