The past months have seen a string of financial calamities, the likes of which have not been seen since the S&L crises of the late 1980. By now most of us have some sense of what went wrong. Housing prices went up at a rate that was completely unconnected with the actual growth of the economy. Suddenly real estate became a boomtown, and those wishing to make it big overnight left the trading floor and the racetrack and headed for a subdivision. For seven long years the bubble grew, and while a few naybobs cautioned that the real estate market, just as every other overvalued commodity in the history of finance, would come back to earth, many of us saw the values of our houses reaching for the infinite. In such an environment it is no wonder that many of us took on massive debt loads in the sure knowledge that in a few short years the ever-expanding value of our houses would allow for a quick refinance.

Every bubble requires a sucker and this time around it was manically optimistic mortgage writers. In times past you had to demonstrate that it would be reasonably likely that you could pay your mortgage before they would right you one, no more. Now you only had to demonstrate that you could reasonably pay your mortgage provided that your house’s value jumped by 15 or 20% a year. Like a mythical dragon eating its own tail, easy mortgages made housing prices rise, while rising housing prices made mortgages easy to come by.

But like a dreams eventually one must wake. A house, after all, is just the place were you live, and many people were understandably leery of taking on a debt that was equivalent to their projected lifetime earnings. Pretty soon every one willing to buy in at the stratosphere had. Homes went on the market and didn’t sell instantly. Prices froze and then began to drop. Instead of refinancing, homeowners were faced with the looming specter of unpayable balloon payments on a house worth tens of thousands of dollars less than their debt.

Thousands of families lost their nest eggs, neighborhoods were gutted by foreclosure, and the sloppier mortgage brokers were saddled with unwanted real estate and forced underground. A tragic circumstances certainly, but not a worldwide crisis. Except that nothing was making more money than real estate during the boom. Every major financial system tied itself to the mess in some deeply dangerous manner. Banks bought mortgages as they had in time past, believing that most of them would be paid with interest and that their money was safe. Financial institutions around the planet bought massive amounts of mortgage-backed bonds, in the erroneous belief that people had to pass a credit check to get a mortgage. And every one bought insurance against the unlikely event of massive defaults, an event so unlikely that the insurance companies couldn’t actually cover the claims that they never saw coming.

Now the worlds central banks are pumping money into the system, nationalizing formerly invulnerable financial institutions, and in short doing everything possible to keep the whole how cards from falling down. The final payload of debt has found it’s resting place, and it is all of us.

If there is a lesson to be learned here it is an old one. Buy low, sell high, and always remember that at the end of the day, a thing is just a thing. All our speculations are rooted in the idea that somebody actually wants that thing. When a market’s value becomes based not in what a thing does, but on what we might talk ourselves into paying for it, it’s time to sell.