When you spend any time in the financial or economic corners of the world today - and especially in the United States - you can't help but feel as Wyatt and Billy might have, besieged by contorted and melted stat's, numbers, charts, and graphs, accompanied by the rhythmic and incessant hammering of the battling economists and financiers on TV and the internet. There just isn't any escape from the funhouse mirrors we have voluntarily ingested.

It's hard to find a corner of economics that has not been acid washed, however if one were to look hard enough, it would become obvious that for any kind of recovery to occur in America - and the world - US home ownership has got to reset to sustainable levels before any other good can occur.

A great part of the economic growth of the past decade was built on the back of residential real estate, in the form of leveraged debt, which home owners used to finance insane levels of spending on nothing but crap. In 1960, household leverage (Household debt/personal disposable income) was 55%. In 1985 that number had soared to 85% as newer and more aggressive credit products entered the market. However by 2006, the year the housing bubble burst, American households were in debt so horribly, that income fell way behind. 133% at its peak. That's 33% more debt than there was income to service it.

The dramatic economic growth of the decade since the dot com bubble burst was built almost exclusively on personal debt that was always unsustainable. But like a couple of vodka soused bikers about to eat a fistful of acid, everybody was having such a good time absolutely nobody did anything to mitigate the insanity, let alone stop it. Governments relaxed legislation ( in any real sense, regulation down at street level simply disappeared), mortgage sharks invented small print laden exotic mortgage products, and dot com lemmings piled into a massive real estate frenzy of speculation that drove up prices in a seeming self fulfilling prophesy of profit, the ever elusive self propelled machine. More equity begat more debt, which begat profligate amounts of consumption - which it was agreed everybody needs.

When the day of reckoning finally came, house values fell, mortgages exploded, and consumption disappeared. The debt remained.

Virtually no economic recovery is going to occur as long as the price of an American home is out of whack with the ability of folks to intelligently and prudently purchase and sustain. For that to occur, US household leverage is going to have to retreat from its 133% peak, to a minimum of 100% for sustainability, which is essentially 2002 levels. A robust economy will require further balance, back perhaps as far as 1985 levels.

There are currently over 3 million vacant American homes, with a further 4 million in the foreclosure pipeline. That inventory of homes has to be cleared before stability is reached, a process that could take a decade or more. Worse, the foreclosure rate is heating up and not slowing, adding even more useless and empty vacant properties to an already saturated market.

In the first quarter of 2009, and for the first time since records were kept, the actual formation of households declined, and declined by a staggering 500,000 units. That is half a million Americans who have elected to forgo the apple pie American Dream. A massive chunk of potential to soak up inventory lost in a decidedly worrisome trend.

And even worse again, the actual jobless rate is passing through the 16% barrier, headed perhaps, to 20%. No Job, no house, no spending on cars, clothes, and coke.

Some believe that eventually, everything will return to "normal". If normal is unsustainable debt and crazy inflated house prices, then they will wait in vain. As ever in a dysfunctional free market economy of booms and busts, normal is a moving target, and today, normal is a great deal further down the pain ladder than anyone now expects.