England is ahead of us. Property prices rose first, faster and further. Now the boom seems to be over.

"Houses on the edge," is this week's MoneyWeek cover story. Houses are about to fall off a cliff, the feature story tells us. Debt service costs have risen to their limit, nearly 22% of after-tax income, says James Ferguson. The last time that level was reached, in 1990, marked the beginning of a bust in the housing industry.

Few people seem aware of it. Instead, there is an air of calm, complacency, and self-assurance in London. No bust has come. Instead, the market merely loses air, like a slow leak in a bicycle tire, or a broken music box winding down.

It is like the beginning of World War II, says Ferguson:

"For the 8 months after the outbreak of WWII, from September 1939 to April 1940, during the so-called 'phony war,' so little happened that children [who had been] evacuated to the country were returned to London. Some probably argued at the time that it was all going to blow over without incident." But then, the Panzers raced across Belgium, and bombs started raining down on London.

"Just because the market has defied expectations for so long," adds Scheherazade Daneshkhu in the Financial Times, "does not necessarily mean that the danger is now past."

Over on the other side of the Atlantic, the market has defied no one's expectations.  People thought prices would go up; they went up. As near as we can tell, they are still going up in some areasââ,¬Â¦and going nowhere in others.

The typical house in Santa Clarita, California, rose to $600,000 in December, up 15% from a year ago. "We are just not making anymore land," said an especially clever real estate agent. They may not be making any more land, but they are making more houses at a near-record clip - almost as many new ones were slapped together in 2005 as were put up in the all-time record year, 1972. 

But what's this? "Fed sees a housing slowdown," reports the Associated Press. And in December, the rate of new-house starts went down more than expected. If the new rate holds, about 200,000 fewer new houses will blemish the landscape than the year before. 

Builders seem to be picking up their tools and going home. 

Our guess is that the typical buyer is under pressure, though he makes no more money, his energy bills are rising; his health care is more expensive (if he can still afford it at all); the credit card companies are putting up minimum payment levels; and worst of all, he already has too much debt.

More evidence that the lower- and middle-income levels are feeling pinched - from yesterday's news:  nationwide, the foreclosure rate is running 13% ahead of last year.

And, in an interesting little sign of the times: metal theft is rocketing. Copper and aluminum prices are the highest they've been in 17 years. We don't know if the thieves are desperate for cash, or just looking for an opportunity for modern art at a discount. 

Here in London, a huge bronze statue - supposedly an important work of art, worth millions - was hauled away by thieves. And in America, empty houses are being ransacked for aluminum siding, gutters and downspouts...as well as copper wires and pipes. "Everybody's doing it," according to a policeman in Springfield, Ohio. 

Americans, along with the British, seem to have reached a limit. It does not necessarily show up in the averages; if half the nation is getting richer and the other half getting poorer, the average will remain steady. Still, there is bound to be trouble sooner or later.  More and more people are having a hard time keeping up.

For the moment, America and Britain enjoy a phony prosperity - a financial peace paid for with debt. But the danger is not past; it grows daily.

*** Gold, gold, gold...Zut! Gold shot up $14.50 yesterday, ending the one-day correction we thought we saw. It goes up too far, too fast for us. We can't get in. 

*** Meanwhile, we saw an article in Le Monde in which the Bank of France was congratulating itself. "Our finances are better than they've been in a long time," say the bankers. Why? Because they have more money. Where did they get the money?  They sold off gold in 2004 and 2005! 

Oh, these poor dumbbells. France and Britain have been selling off their nation's gold reserves - while the price of the metal rises. And for what? Paper money. They are going to feel like idiots. Or, at least they should.

The United States still has its gold, or claims to have it - 261.8 million ounces.  Let's see, at $500 an ounce, that's worth...could this be right?...only $130 billion! Did we do the math right? If so, the entire gold reserves of the United States of America is less than about a third of its annual budget deficit...and less than a fifth of this year's trade deficit. Or, to look at it another way, at the current rate, the United States is creating more new paper money every two months than all the gold it has in Ft. Knox. 

*** "Isn't this amazing?" writes reader Frank Sobkowiak, from "a mountain top in beautiful corner of North Eastern Pennsylvania." He forwarded this e-mail to us in response to our renewed interest in dismantling the IRS.

"This is a list of the various ways in which citizens of the U S of A are taxed:

Accounts Receivable Tax
Building Permit Tax
Capital Gains Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Court Fines (indirect taxes)
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel permit tax
Gasoline Tax (42 cents per gallon)
Hunting License Tax
Inheritance Tax Interest expense (tax on the money)
Inventory tax IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Local Income Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Septic Permit Tax
Service Charge Taxes
Social Security Tax
Road Usage Taxes (Truckers)
Sales Taxes
Recreational Vehicle Tax
Road Toll Booth Taxes
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Toll Bridge Taxes
Toll Tunnel Taxes
Traffic Fines (indirect taxation)
Trailer Registration Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

"COMMENTS: Not one of these taxes existed 100 years ago and our nation was the most prosperous in the world, had absolutely no national debt, had the largest middle class in the world and only one parent had to work to support the family.

"What the hell happened?"

*** Warren Buffett, the Oracle of Omaha, spoke to a group in Reno. 

"Right now, the rest of the world owns $3 trillion more of us than we own of them," Mr. Buffett told students at the University of Nevada, Reno. "In my view, it will create political turmoil at some point...Pretty soon, I think there will be a big adjustment."

The U.S. trade deficit for the first 11 months of 2005 totaled $661.8 billion, up from the annual record of $617.6 billion set in 2004. Include December figures and the total will top $700 billion. 

"That's $2 billion a day," said Buffett. "We are like a super rich family that owns a farm the size of Texas. You sell off a little bit of the farm and you don't see it."

Fifteen years ago, the United States had no trade deficit with China, he said. "Now it's $200 billion. If we don't change the course, the rest of the world could own $15 trillion of us. That's pretty substantial. That's equal to the value of all American stock."

*** Around two million. This round number was given to us by a friend. We had heard that the old family farm in Maryland had been sold. That was the amount it brought.

It was in this farmhouse, on the banks of the Patuxent River, where our great-great grandfather had gone madââ,¬Â¦and our grandmother had lived as a child, raised by the madman after her mother had died. The house had been built by an even more remote ancestor, in the 18th century, following the arrival of the family patriarch, in chains, from England.

Old Seamus MacKenzie had been on the wrong side at the Battle of Culloden. He was captured by the cruel English (they were no more cruel than the Scots, but that was how the family used to refer to them...we couldn't refer to the English without the modifier 'cruel,' nor could we pronounce the word 'Yankee' without the adjective 'damned' in front of if) and sold into indentured servitude on Kent Island, in the colony of Maryland. 

Later, the family built the house - probably with slave labor - out of bricks fired right there; it was a gentle and charming example of the architecture of the period, surrounded by tobacco and cornfields on the bottom land. The corn was used to feed animals and slaves. But the tobacco was packed into "hogsheads" and rolled down to the river, where it was loaded onto skiffs and then onto ships for passage back to England. There, it gave Old Seamus's enemies lung cancer.

Families break down...and then revive. After our great-great grandfather went mad, the farm passed out of the family. Our own grandfather considered buying it back in 1927.  But he thought the price asked at the time - $25,000 - a form of extortion. Besides, he went broke in the Great Depression and was unable to buy anything. And so the house went to others. Until recently, it was lived in by a former colonel in the U.S. marines, and his family, until that family, too, wanted to get rid of it. Now, it is in the hands of developers. Soon, the tobacco fields will be filled with houses, built of the latest synthetic materials, containing the latest conveniences, adorned with the latest granite countertops, and sold with nothing down, interest-only mortgages. 

Oh, Lord...we thank thee for this progress you have bestowed upon us.

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