This is going to be a dress-down-Friday edition. Not that there isn't a lot to be reckoned with. It's just that we've done enough reckoning for one week. Besides, it's summer…time for a break…a different way of looking at things…a slower pace…a more relaxed schedule.

So, we got out to the office by 6AM so we could complete our reckonings by 1PM…and then marshal the children into squads for various assignments around the house. One group will paint windows and shutters. Another will clean up the office. Still another will finish painting the inside of the gypsy wagon. If we get everyone working at peak efficiency we'll be able to finish our projects before the dinner bell sounds at 8PM! Ah…taking it easy… More below…

We were surprised to see the papers already talking about "Back to School Shopping." Our summer vacation just began yesterday!

We're also wondering how this fall's shopping season is going to turn out. The subprime mortgage problem must be starting to pinch a lot of subprime families. October is the big month for adjustable rate mortgages. That is when the number of resets reaches its peak; by our calculations nearly half a million families will feel the effects that month alone. How much shopping are they going to do? We'll find out…

Treasury Secretary Paulson says the subprime mess will not affect the rest of the economy. He must have had a lot of practice lying at Goldman Sachs (NYSE:GS)…or else it just comes naturally to him. Affecting the rest of the economy is precisely what the subprime credit debacle is doing - just as you'd expect.

At the bottom end, consumers still seem to be coping. Consumer spending is said to be going up - though, at a slower and slower rate. The little guys, like the big guys, have learned to take chances. They believe that nothing ever goes too far wrong. Whenever a correction threatens, along come the feds with more money. Worst case, they figure, the economy will turn a little soft - as it did in 2001-2002. They didn't cut back spending then; they don't expect to do so this time either.

On the rare occasions when we actually worry about the future…we wonder what will happen when these poor lumpenhouseholders realize what has happened to them, for they are the big losers of this economic era. Jobs and wages are moving to Asia - leaving them behind. And they actually helped finance…they helped to speed up…the process - by buying more from Asia than they could rightly afford. Now, they are the most indebted people in the world…with the most expensive lifestyles to support…and with the slowest income growth outside of Africa. While the foreigners have gotten richer and more competitive…America's middle and lower-middle classes have merely gone deeper into debt…and added to their monthly expenses. They have bigger houses to heat and cool. They have more cars. They have more gadgets and second homes. And in the years ahead, they'll find themselves competing with these dynamic foreigners for jobs…for earnings…for fuel…even for food - while trying to avoid bankruptcy.

At the upper end, speculators are discovering that money doesn't always come along when you need it.

The TIMES of London reports that the big banks are stuck with a half a trillion dollars' worth of debt. The banks financed deals, expecting to sell the paper on to investors. But, suddenly, investors don't want it.

Many deals may be "on hold" for months, says the Financial Times. Turmoil in the credit market may last for years, the paper continues. The Wall Street Journal take s up the theme with an unseasonable metaphor…the leveraged deals have "freezed" in the pipeline, says the WSJ.

Small wonder. Investors who got in on these deals must wish the pipe had frozen sooner…or that they had listened to Chris Mayer's advice - and put their money in stocks that the Wall Street mainstream has caught onto yet…catch up stocks that erase years of falling behind.

Caxton Associates (JNB:CAT) sent out a letter to its nervous investors; it was combating "unfounded rumors," it said, that its funds were in trouble.

Investors in Bear Stearns' (NYSE:BSC) two funds found that rumors concerning those funds were not unfounded at all. The funds went bankrupt. And now, the investors have gone to court, saying they were misled as to what was in them. Accredited Home Lenders Holding (NASDAQ:LEND) says it may go bankrupt. Homebuilders and lenders all over the country are running scared.

Meanwhile, many hedge funds are said to be barring investors from taking their money out; they are struggling to avoid being forced to mark their assets to market. Like down-market consumers, they're hoping to wait out this soft patch.

A total of about $1.7 trillion is supposed to be in hedge funds. Surely, a lot of it will come out…or disappear…before this downdraft in the credit markets is over.

And it won't be over for a while…most likely.

Our old friend, Jim Rogers, says the housing bubble is "one of history's biggest bubbles." Rogers says he's still short investment banks and homebuilders.

This thing "has a long way to go," he believes.

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