The heat came down on London yesterday like a hot iron. It took the wrinkles out, leaving the whole city as flat and limp as an old pair of pants.

We walked along the river in Southwark and sat down on one of the benches looking out towards Charing Cross station on the other bank. The water was low. Everyone outside shuffled along like a sluggish tide. Lines formed to get into restaurants. Strollers bumped into each other. Out on the river, a party was taking place on one of the tourist boats; the sounds of a jazz saxophone floated down the river like litter.

All of a sudden, we felt the same odd sensation that we recall from the late '90s...the fin de bubble feeling... that too many people were enjoying themselves too much. We sat down at a sidewalk cafe where you had to serve yourself. The two of us each had a salad and a glass of white wine. The bill came to 26 pounds - or nearly $50. Our modest bachelor pad in a nearby building costs over $3,000 per month. Elizabeth is looking for an apartment; she believes it will cost nearly $15,000 per month to move the whole family to London. Where do people get so much money?

But that too is a typical fin de bubble hallucination - that money will always be there when you need it.

Americans have delusions of mediocrity. This is a point we've made before. We make it here again, because the things that were extraordinary a year ago are even more extraordinary now. Things that would have been taken for absurd a generation ago are now taken for granted.

As a bubble expands, the celebration that began as a little cocktail reception turns into a wild party, with guests dancing on tables and throwing up outside. Soon, it gets out of hand.

At the end of a bubble, the delusions and distortions swell up to grotesque proportions. People seem ready to believe anything as long as it fits their own fantasies. The hallucinations become so extravagant that they blow up.

The Economist, for example, reports, "A recent survey of buyers in Los Angeles indicated that they expected their homes to increase in value by a whopping 22% a year over the next decade. This would put the median price per house over $3 million. At current increases in income, the median family will only have $54,535."

How is a family earning $54,535 going to buy a $3 million house? Even if the whole thing were financed at 5%, it would still mean monthly payments of $12,500, or nearly three times total monthly earnings. Can it happen? No. It is close enough to impossible that it can smell what it had for dinner. Only a fool would bet on it. And yet, it appears that millions of people not only take the wager - they stake their entire financial futures on it.

On the front page of today's Daily Mail is a story about a man who convinced people that he was a spy, that they were in danger, and that they needed him for protection from terrorists. He then took money from his victims - stealing nearly $2 million by one guess. In such circumstances, explained a professor from the University of Birminghan, "captors can wield immense power over their victims who will do almost anything to please them." One of his victims, a young man, even allowed himself to be beaten regularly so that it would "toughen him up."

In another context, the man could be running for President of the United States or perhaps FBI director. The game is the same - persuading people that they are in great danger and getting them to hand over their money and their liberty. But the poor fellow was a lone operator, a freelancer and an amateur in the protection racket; he botched his business and now faces a long stay in the hoosegow.

The real pros are still at it, with their own "war on terror" hustle. We remind dear readers of the big picture: after the collapse of the Soviet Union, the American imperators needed a new enemy. The nation faced no substantial military threat; so the best they could come up with was a shadow enemy, terrorists. Trouble was, there were barely enough real terrorists to fill a small movie theatre. They needed more to provide a credible reason to spend hundreds of billions of dollars and continue to expand the empire. The core business of an empire after all is protection. But it only works if you have something to protect against.

Thus developed the war against Iraq - a country with no terrorists and no apparent connection to them. In fact, since the Gulf War, Iraq - which had once been a client state of the United States - had been a hotbed of peace. Still, attacking Iraq seemed like a good idea at the time. Since then, the results have been predictably bad for Americans, but good for the empire. As reported in today's Daily Mail, "Iraq war is spawning a breed of ruthless 'holy warriors' says the CIA." In other words, the strategy is working: terrorists are multiplying.

"They are regarded as more deadly than their Afghan counterparts and are said to be highly trained in assassinations, kidnapping, car bombing and urban warfare," continues the Daily Mail's report. "The CIA's report, leaded to the New York Times, came as America's commander in the Gulf, General John Abizaid, said the insurgency had grown stronger, not weaker, and more foreign fighters were entering Iraq.

"Many are expected to carry out attacks in Western Europe, according to the report, while others will return to their native countries in the Middle East - particularly Saudi Arabia, where it is believed they will attempt to destabilize national governments. The report, which has gone to the White House, concludes that Iraq is serving as a real-world laboratory for urban combat."

Iraq had never seen a suicide bombing before the American occupation. Now, they are as common as drunks at an English wedding. The whole country has been turned into a recruitment and training center for terrorists. This is good news for America's empire industry; now, it has something to provide protection against.

The bad news for the empire is that its business model is nutty. The more protection it provides, the more it loses money. That is to say, its homeland supporters become poorer. It must be galling for those few who understand what it really going on: they lose money-minting terrorists in Iraq...and then lose money fighting them.

But at a certain point, the logic of a bubble - whether in markets or in politics - is the logic of self-destruction. People do stranger and stranger things, not because they are trying to avoid their own ruin, but because they are trying to bring it on.

The Daily Mail is a wealth of grist for our mill today. Elsewhere in the paper is the story of Mr. Mark McDonald, 43, of Norfolk. The poor man suffered what the paper called "Death by credit." Like your editor, the man was a writer. Like your editor, he was not particularly well paid. But unlike your editor, he had a great number of credit cards. His debt rose to about $120,000 - on which, he made minimum payments as long as he was able. But the burden of it got to be too great, and the father of two decided he would rather place himself on the rails in front of the 7:09 to London instead of remaining in the ranks of those living with enormous, unsustainable debt levels.

"Mr. McDonald's death was the fifth known suicide due to debt in the past two years," says the Daily Mail.

McDonald's wife blasted the credit industry: "They are just interested in making money," said the woman. But who isn't? And five suicides in two years seem like a small price to pay for the benefits of unlimited consumer credit. Besides, the whole empire rests on nothing more than the sand of credit. The entire U.S. military budget - great as it is - is still less than the amount of net lending to America. Without loans from overseas, the empire itself, as we have known it, is finished.

The Daily News report had a certain fin de bubble tone to it. Twice as many people are calling for credit counseling this year as the year before, the paper noted. Twenty five thousand picked up the phone last month. For every decisive writer like McDonald there must be thousands of wishy-washy plumbers and dough bakers who can't make up their minds. They muddle through...and hoping that their debts never catch up with them.