"The phones are going crazy," says the president of a non-profit debt-counseling firm in Florida.

It is the Fourth of July and the Yankee doodles are going broke.

The phones are going crazy because consumers went crazy after the Fed went crazy. It was crazy for the Fed to create a deadly debt bubble. It was crazy for consumers to let themselves fall victim to it. And now what can they do, but call for credit counseling?

"People refinanced (their mortgages) six months or a year ago, so the 'house bank' is empty," a counselor explains. "Most can't go back and tap their home equity again."

"You let the car payment go one month, then the house payment. Then you make a lot of little creditors happy for one month, maybe for two months. Then it becomes obvious that you have to catch up on car payments, and everything else slides."

Apparently, millions of Americans rushed to declare bankruptcy before the law change last fall. Those bankruptcy filings temporarily depressed the delinquency statistics and other measures of consumer financial distress.

"Now we're seeing a new crop of people starting to get into trouble," says the expert. "They can't keep up. They're the ones most affected by increased gas prices and higher rates."

When a society resists small changes, it will eventually succumb to a big one. This is true for all collective institutions - business, government...and even whole economies.

 Markets are a natural way for economies to adapt to changed circumstances. When oil is scarce, for example, the price rises. This tells consumers not to use so much. And it tells investors to put more money into oil production. Gradually - although sometimes the shocks and crises can be rude and unexpected - needed adjustments are made and things find a new, albeit temporary, equilibrium.

But institutions dislike change. Some people just resist change instinctively. Others have learned how to use the institution for their own purposes - often at the expense of the rest of the world. They are reluctant to give up their privileges, subsidies and parking places. So they use force - through government intervention - to resist. Price controls, restrictions on imports, zoning, regulation, tariffs, licensing, permits, taxes, interdictions, prohibitions - all are designed to avoid natural adjustments and bend prices in whichever direction those with political power prefer.

Cut off from the free movement of prices, of course, investors and consumers get the wrong signals and make the wrong choices. In his landmark book - The Road to Serfdom - Friedrich Hayek argued that the absence of accurate information, provided by freely moving prices, would lead to disaster. He was discussing the Soviet economy, which was then regarded by many people as a model to be emulated. Hayek said no; when central planning replaces market, it inevitably leads to centralized catastrophe.

He was right. The Soviet Union had, and still has, plenty of natural resources. But because they lacked accurate information, the Soviets would use their resources to make finished goods that were less valuable than the raw commodities that went into them. Central planning had created the ultimate absurdity - an economy that subtracted value from its own natural resources. For a long time the truth was disguised by lying numbers and cheating theories. But by the 1980s, it became obvious to even the Soviets that their economy was disaster. It collapsed soon after.

But now we turn to contemporary France...and a news item in the weekend papers:

"The Communist mayor of Saint-Ouen, a working class suburb north of Paris, was so fed up with complaints that property prices had soared out of reach of local budgets that she devised a plan to keep them down.

"When her office thinks the price a seller is asking for a property is too high, it simply blocks the sale. Developers are only granted a permit to build if they promise to sell the new properties at a pre-agreed price.

"'Saint-Ouen is traditionally an industrial area," said Fabrice Marine, a spokesman for the town hall. 'If we had let the market determine the prices, it would have been very difficult for the people of Saint-Ouen.'"

Of course, we laugh. If they control prices downward, no one will want to build new houses. Instead of going down, price pressure on the few that are available will go up even further. Besides, what are they thinking? For every buyer there must be a seller. In fact, there must be exactly the same number of buyers as sellers. What principle of fairness or economics causes them to favor one group over the other?

We can only guess. There must be a lot of voters in the area who might want to buy...and relatively few who might want to sell.

Pity the poor homeowner who has worked his whole life, living in the miserable suburb of Saint-Ouen. Now, his retirement at hand, he finally wants to unload his apartment and retire to the Cote d'Azur...and along comes the mayor, telling him that he can't have his price. Fortunately, the French as a supple and clever race. Most likely, he will get his price - even if some of it has to pass under the table!

But our point is simple, modest and self-evident: In trying to hold off natural market adjustments, the mayor will make the situation worse. So too, our own Federal Reserve - now the Bank of Ben Bernanke - in trying to hold off the correction of 2001-2002 has made the situation in 2006 much worse. Now it must face millions of homeowners who are running out of money. During the last five years they have come to depend on real estate as a source of spending money. Now that housing resales are slowing so is their source of ready cash. Soon, we predict, they will stop spending so freely.

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