"Nothing comes from nothing…nothing ever could…

"So somewhere in my youth or childhood, I must have done something good…"

CNN worries about a "tidal wave of foreclosures" hitting central Florida.

"Orlando has blown up," says a source quoted by CNN.

The man doing the talking runs a website where desperate sellers can try to get rid of their houses fast. The houses are put up for sale at prices below appraised values…and then marked down systematically until they sell.

"There's been a 700 percent increase in traffic of people filling out our forms," he continued. "I could put a bull's-eye on Orlando and write the headline for what will be going on in January and February."

Today, dear reader, we take up a profound subject in a superficial way - what is real?

When you need to make a monthly mortgage payment, there is not much fantasy or romance to it. It is real. When you don't have the money, it is even more real…which is to say, the experience is more intense and more memorable.

In the financial world today, some experiences are much more real than others.

As you know, we are enjoying what Mises called a "Crack-Up Boom." It's great fun…as long as it lasts. But it has some very un-real parts to it.

The whole thing is tricked along by money that is, essentially, not real. Central banks create money "out of thin air." The quantity of money is growing very rapidly, all over the world. Everywhere you look, money is increasing two to 20 times faster than GDP growth. (In Zimbabwe, the increase is infinite…since the money supply is growing by thousands of percent, while GDP growth is negative.)

Can you get something real from something un-real? Does something come from nothing?

We don't know…

But what we do know is that there are a lot of phony parts to this boom. In the West, art, stocks, houses - they're all going up. Just look at a chart of almost any stock market in the world. Or a chart of housing prices. Or a chart of almost any tradable asset class. Asset prices are rising; and the people who own them feel they are much richer. But is this increase real? Are these assets actually worth more? Or are they merely being teased up in price by a higher volume of money? Is a Monet more attractive today than it was 10 years ago? Not really. Does a house give better service? Is the yield from a stock higher? The answer is no. Much of the extra wealth that people think they have is un-real.

Meanwhile, in the East, factories are being built…output is going up…people who used to tend ducks and till the soil by hand are now working on assembly lines and living in air-conditioned apartments in brand new cities. This wealth is real and growing at breakneck speed.

Meanwhile, back in the Homeland…and Britain too…ordinary people are suffering their prosperity. They have enjoyed more apparent wealth - bigger houses, more vacations, more dinners out - but this is wealth consumed, not wealth created. In order to afford to spend so much more money, they had to borrow. So their real net wealth actually went down.

"Lost your pay slip? Call us…" say signs along the highways in Britain. We had no idea what this meant. Why wouldn't people just ask their employer for a copy?

"Oh no…it's a big scam," MoneyWeek editor Merryn Somerset Webb enlightened us. "There's a whole industry of people who provide fraudulent pay slips so that you can get a mortgage to buy a house."

And now many of these people are living in bigger houses, but sending in higher mortgage payments and more property taxes, and these larger houses cost more in utilities. When the going was good, it looked as though it would be no trouble to keep up this level of extra wealth consumption. But now that the going is not so good, many of these people are in real trouble. Some are trapped between two mortgages and need to sell a house fast. Others simply have mortgage payments that are too large.

Mortgage rates are rising in the United States. And in Britain, last week, the Bank of England raised rates. "Now it REALLY hurts," shouts a headline in The Daily Mail.

Freddie Mac predicts that house sales this year will drop 7% - to their lowest level since 2001. And an article in Barron's explains why. The REAL mortgage rate is the difference between what a person pays for a mortgage loan and how much the property goes up. If mortgage money costs 6%, and a house goes up 6%, in effect, the real cost of the mortgage is zero.

A couple years ago, people might have paid only 5% for mortgage money…while their houses went up 15%. It was as if the mortgage rate was really MINUS 10%. But now, house prices aren't going up…they're going down - at least in America.

Barron's put the real cost of a mortgage at about 6%. But in an area such as Orlando, where house prices could be falling fast, the real cost of a mortgage could be 10%…or 15%. No wonder sales are sluggish. Who wants to buy a house under those conditions?

Not only is the marginal homeowner subjected to some real pain, so are the rich professionals who lent him money. Credit Suisse estimates that real total losses from CDOs (collateralized debt obligations - derivatives backed by mortgages) will top $52 billion. Of course, that assumes that no one panics…and nothing else goes wrong.

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