When trouble comes, typically, the middle classes are the ones who suffer. They have something to lose, but not enough. Market crashes, deflation, defaults and currency depreciations hurt the middle classes, too, reducing incomes, smashing nest eggs, and generally making almost everyone poorer.

Americans might have to get used to it. Instead of giving advice to other countries, they may have to take some. There are bound to be plenty of economists in other countries who will want to offer it.

You’ve got to hand it to the Goldman crowd. They securitized dicey mortgages, sold them to their customers, and then, in order to protect themselves from the inevitable losses, sold them short!  Any Humpty Dumpty investor dumb enough to sit on this wall deserves to be pushed. Goldman gave them all a shove – and made money doing it.

The typical fellow has no obvious way to protect himself. His house falls in value, his earnings go down in value, his living costs go up, and he’s out of luck.

The United States can create as many dollars as it wants at negligible cost. The dollars, of course, are essentially worthless. But the companies, the factories, the land, the resources – those are really valuable. When foreigners gain ownership, Americans’ own wealth, and independence, is reduced.

The subprime meltdown and credit market woes have had an effect on banks, but what does it mean for the broader market?

Many expect more borrowing in 2008, as consumers struggle with tighter credit and potentially higher mortgage payments. Coast to coast, the story is the same. It is the story of an economy late in the credit cycle; it is the story of a downswing, not an up-swing.

Things always go in cycles. Short cycles. Long cycles. But what you never quite know is where you are in the cycle.

Total U.S. credit debt is pressing down on the U.S. economy. Every day, people add more debt, and inflation takes a little more off. Eventually, inflation will wipe out debt.