Friday, the stock market seemed to notice that trouble is afoot. The Dow dropped more than 200 points as investors put their ears to the ground. Even Google, usually on a tear, failed to escape - shares were down 36 points.
 
Where was that rumbling noise coming from? Newspapers now talk of oil shooting over $100 a barrel...if the Iran situation gets out of control.

And what about things in Iraq? Are they still going according to the neo-con plan? Do they even have a plan?

Meanwhile, here at home, the real estate boom seems to be decomposing. It is already giving off rumors. People have tried selling houses; they're not always getting the price they hoped for. In some cases, they're not getting any price at all. Inventories rise.

"Dramatically," is how New York Mayor Michael Bloomberg describes the decay of the local real estate market. It would take a "miracle," says Bloomberg, to stop falling prices now.

"Higher interest rates," was a reason cited by Hizzoner. A look at the yield curve last week only made investors more nervous. It was 'inverted'
- a classic early recession signal.

Leaning down, cupping their hands to their ears to try to hear...you could see investors' lips moving. They were putting two and two together.

"If oil rises or house prices fall, how will consumers be able to keep spending?" they asked themselves. "Last year, real wages went down. It was only by taking equity out of their homes that people were able to keep going. And so, two million of them went broke."

We have nothing to add to investors' concerns this morning. We are happy to see them sweat - if only briefly and only slightly. It takes a load off our own shoulders; let them do some of the worrying.

Instead, we pass along some of our thoughts from this weekend.

The thoughts began with an innocent request. "Would you sew a button on our coat?" we asked Elizabeth.

"I'll ask Angelica, the cleaning woman from Colombia, to do it," came the reply.

"OK...but it looks like it needs a button on the other side, because the fabric is getting pretty weak."

"Well, then, we better take it to a tailor and get it done right."

We had just come back from church. The excursion had cost an amazing amount of money. Nearly $50 in cab rides, to and from, plus the $10 we put in the collection plate (which made us feel like a miser in comparison to the cab ride), and then we stopped and bought a magazine, shoe polish and a brush to put it on with. By the time we got home, we were lighter by about $90.

"Wait a minute...if you send it out, it will cost at least $5...maybe $10. Can't you do it yourself?"

"I just don't have time..."

When we were young and poor, we wouldn't have thought twice about it. Our own labor was cheap. Capital was dear. Almost whatever it was, we did it ourselves. But now, times have changed. Capital is cheap. It is labor (or
time) that is dear. We might even prefer to do the job ourselves, but we don't have the time. We're too busy. So, we pay someone else to do it - even at rates that take our breath away.

As you get older, you have less and less time left. But if you've been lucky, or saved your money, you have more capital available. And if you've been on the ball, you should also have accumulated some skill, or wisdom that makes your time and capital worth more, because you know what to do with it. You can no longer afford to spend your time washing the car or painting the living room, for example; your time is too valuable. Those jobs are given out to people who have more labor and less capital than you do. (If you want to paint the living room, you have to count it as a leisure activity, knowing that someone else could certainly do it cheaper
- when you add in the cost of your own time - and, probably, better.)

Take China, a poor country. A few years ago, maybe still even today, it had so much labor and so little capital it had to build its roads by hand. Instead of expensive earth moving equipment, hundreds of workers pitched in with shovels and wicker baskets.

In Nicaragua, also a poor country, trenches are still dug by hand. "It costs about the same as having a back-hoe do the work," explained our friend, Antonio. "But this way at least people get to work."

North of Nicaragua, on the other side of the Rio Grande, is a mature, rich country. Gringo labor is expensive. Like an aging capitalist, Norte Americano is forced to depend on its wisdom, skills, and capital. This seems to be working for the rich there. They're doing OK, according to most reports. But a few rungs lower on the economic ladder, where people get paid weekly, often in cash, the average American has no more real skills - maybe less - than his average counterpart in India or China. What does he know how to do? Operate a car and a TV remote? Maybe.

The average man in a poor country has gotten used to living without money; he's learned how to do things himself. He learned how to "make do," and treasure every bit of capital that comes his way. The average man in America, on the other hand, has gotten used to having money...and credit. He's used to having someone else prepare his meals, pave his roads, make his gadgets, and take care of his aged grandmother. Worse of all, he's forgotten how to save money. As a result, he has no capital, and a negative income statement; he spends more than he earns. He lives week-to-week, paycheck-to-paycheck, trusting that things will all work out somehow. Like an old man on Social Security, he listens for trouble and hopes the system doesn't run out of money before he runs out of time.

*** Sir Alan Greenspan steps down next week, and as we skim the news, we see the press is crammed with tributes to "the greatest central banker - ever."

"Under Greenspan's watch," writes The Washington Post, "the economy thrived despite stock market crashes, international financial crises, terrorist attacks, wars and other shocks."

As we were just about to classify this piece as another homage to Greenspan, something catches our eye: "Still his legacy will be judged not just by his record at the Fed," continues The Post, "but also by the economy he bequeaths."

Uh-oh...this is the point where things stop looking so cheery for Big Al - when people start examining what effect his E-Z money policies have really had on the economy.

"The Fed's low interest rates encouraged consumers to borrow and spend on houses, autos and other goods, spurring economic growth for several years when businesses were cutting jobs and reluctant to invest.

"The result is a prosperity built on borrowing."

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