"Listen hard and watch out," cautions the Wall Street Journal.

But listen and watch not the financial markets; nothing much has happened for a long time. Stocks are about where they've been for the last eight years - except for the tech stocks, which haven't come back from the crash of 2000. The dollar is still at 1.28 per euro - where it has been for many, many months. And gold has been in a correction without much movement for the last several weeks. Mssrs. Case and Shiller, writing in the Journal, are listening, instead, to the sound of real estate beginning its inexorable slide down.

"As always, the future is uncertain. Many of the underpinnings of the boom are still strong, and the soft-landing scenario so widely promoted by economists and industry leaders is a possibility if the U.S. can avoid a generalized inflation, if long rates don't rise a lot, and if the rest of the economy stays strong. But that possibility is not enough to give great comfort to all those who worry today about the housing market.

"Unfortunately, there is significant risk of a very bad period, with slow sales, slim commissions, falling prices, rising default and foreclosures, serious trouble in financial markets, and a possible recession sooner than most of us expected. Deterioration in that intangible housing market psychology is the most uncertain factor in the outlook today. Listen hard and watch out."

But listening hard is not easy to do when the sun is out, as it is today, the last real day of summer at Ouzilly. Tomorrow, the family heads back to Paris to take up its normal schedule: school, work and worse yet, dinner parties. We will stay behind here until Monday to close up the house, and then we too return to our routine - flying to London to take our place is the great maze of offices, desks, computer terminals and suits that make up the workaday world of a modern city, for Monday may be Labor Day in the United States, but it is a regular laboring day in the rest of the world. Painters paint. Bakers bake. Cartwrights wright carts. Politicians lie and swindle. Celebrities make spectacles of themselves. And the financial industry peddles its dreams and illusions.

One of the big illusions it peddled to us was the idea that you can't go wrong with real estate - an illusion that seemed real during the boom, when the sun was out and prices were high. After all, viewed from almost any time in the past, prices are higher than they have ever been, which gives the impression that housing always goes up.

But it doesn't always go up. In real terms - once you take out the padding of inflation - property prices can go down and stay down for many decades. From a grand historical perspective, in fact, prices can go down for many centuries, tagging behind the ebb and flow of imperial and economic power. Residential property in Rome, for instance, reached its zenith under the Emperor Trajan...and then declined for the next 1700 years, recovering, perhaps, only under Mussolini or Berlusconi, although we don't really know.

For investors, we doubt this is a useful insight. The imperial cycle is too long and too uncertain to be tradable. But it is not so uncertain that we can't guess that the boom is unsustainable. And we can also guess that housing has begun the long slide down hill. When it reaches the bottom, the economy will be in recession and millions of families bankrupt.

*** An article in Le Monde made us wonder again about China's strange present...and possibly even stranger future. The country is still run by communists, we remind readers. How can a nation run by people who do not believe in markets actually function? How can it be the fastest-growing economy on Earth? How can a place where the proletariat supposedly runs the show turn out to be the very same place where capitalists are making the most money?

It just goes to show how futile and worthless most of our ideas really are. Whatever we think, the reality is infinitely more complicated, subtle, and unknowable. That is why we are so humble, here at The Daily Reckoning. As we get older, the more we think...the less we know for sure. If we live long enough, we will surely know nothing at all. Still, that will put us ahead of most people, who know less than nothing. Thinking they know something, they misperceive, misapprehend, and mistake everything. Then, with confidence equal to their own ignorance, they run for public office. The next thing you know, they are passing laws and starting wars...and that is how we get the world we live in.

The Le Monde article tells us that Chinese strategy "doesn't put things in terms of means and ends, based on an advance plan, but more in terms of conditions and consequences." The Chinese are forever trying to turn a situation, whatever it is, to their advantage. Their ideal is to profit in any way possible, without ever really having to fight. Or, as Sun Tzu explained, to turn things around so that by the time you face your enemy, he is already beaten.

A shiver went down our spine. What better strategy could the Chinese follow, we wondered, than what they now pursue? What better game could they play than to treat the U.S. like a pig being fattened for slaughter?

The hog slaughter works thus: the Chinese work around the clock making things for American consumers, who are too broke to pay for them. So much the better - the wily Chinese take bonds, cash, and IOUs. They unload their junk while taking and holding our capital. They may be atheists, but they've figured out at least one part of the Bible: "borrower who is slave to the lender." They may be communists, but they know that it is capital that rules the modern world, not political theory and socialist claptrap.

As time goes by, American consumers and their government come to rely on suckling goods and money from the Chinese. Without it, the U.S. economy would collapse, and the feds would have to scrap for dough to arm its forces. American bureaucrats still talk tough; they still tell the Chinese what they should do with their currency; they still send U.S. fleets to maneuver off the Chinese coast. The bureaucrats still give the Chinese leaders the cold shoulder when they visit. But little by little, it is the Chinese who have gained the upper hand. They have the money, the manpower, the manufacturing base, the technology. We have Britney Spears...and Medicare.

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