The great mill of life grinds away...exceedingly slowly sometimes, but always exceedingly fine.

Now, it is grinding down the Realtors and the sub-prime lenders. The poor lenders are having to take back the mortgages they wrote. And we are really shocked. Shocked! Imagine...you're nice enough to lend to people...you'd think they'd be nice enough to pay you back.

But the borrowers don't have any money. Poor saps. They probably do want to pay the money back. But how can they?

And now, their Neg. Am., I.O. Limited Doc, ARMs are being reset - upward. As much as $1 trillion worth of mortgages are set to be adjusted to higher payments over the next 12 months. And where are those nice lenders now? They're putting away their wallets; folding up their files; or, where they are still lending, they're asking customers for income tax returns!

What are the homeowners to do? If they can't pay? And they can't refinance?

We don't know...but the millwheel still has a few turns left. It will be interesting to see who finally gets crushed...and how.

Right now, the Realtors seem to be getting pinched. Sale prices have not fallen very much - at least, not in most areas. But the volume of transactions has dropped so much that the realtors are having a hard time making ends meet. Many are said to be thinking about waiting on tables, parking cars, or starting a hedge fund.

By the way, last week we ran into an old friend. Actually, he is a young man who saw where the money was and decided to go after it. He started up his own investment business - with practically no resources, no contacts, no investors, no training...no nothing.

"How's it going?" we wanted to know.

"Well...little by little, it's coming along. The key thing is just to keep your expenses very low and get good returns. Last year, my little fund showed a 40% return. So now when I go to people to ask them to invest some money, they are actually interested. Besides, I don't charge a percentage of capital, just a percentage of performance. If they don't make anything, I don't make anything."

"How did you get a 40% gain last year?"

"Simple, I invested in gold stocks."

Surely, the Realtors must be looking at the money business. And maybe even gold. The yellow metal rose almost $10 last Friday...to $672. Oil is near $60 again. All of which suggests to us that whatever is bugging the economy isn't going away anytime soon.

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