The latest development in the rapidly deteriorating housing market is the news that many homeowners now have mortgages that are worth more than the value of their homes. These owners, granted 90 to 100% mortgages at a time when bankers were more than happy to give away cheap money, have found themselves in a situation where paying off their mortgage would leave them significantly out of pocket.

The BBC reports today that 3 million people are now living in negative equity.

There are also reports that some homeowners in America are actually abandoning their homes to repossession because, while they can afford to keep up on their mortgage repayments, if they continue to do so it will end up costing them much more than their property is worth.

The Gods that Failed shows how a reckless, largely unaccountable elite, have lulled the world to sleep with their economic fairytale and that now, with the fairytale having being exposed, ordinary people are waking up in a world of financial hardship.

Even though this elite subcontracted the job of reading bedtime stories to their own children to an army of nannies, they were more than happy to tell fairytales to everybody else, tales in which everyone lives happily ever after.

The Times reported yesterday that as a result of these financial fairytales, nanny agencies have been inundated with calls in recent weeks, as stay-at-home parents are forced to return to work just to make ends meet.

Despite the falling house prices, there are fewer first-time buyers than ever before. Thanks to increasing mortgage rates and unstable house prices, this year could see the lowest number of first-time buyers on record, creating a knock-on effect damaging the entire housing market. Read about it here.

Citing a recent report from the Commission on Growth and Development, and a new book by Oxfam’s head of research Duncan Green, Larry argues in today’s Guardian that the key to development and prosperity is an effective state, accountable to its people, which seeks to address inequality. If the ethical arguments don’t sway you, the practical ones should:

‘The lesson of the past few decades is that those countries which have ensured health and education for all, and which have actively managed the growth process – nations such as South Korea, Mauritius and Botswana – have succeeded whereas those which have seen the strength of the state sapped have struggled. The old Washington consensus notion that a ‘rising tide lifts all boats’ is no longer fashionable, even in Washington.’

In the words of the Commission on Growth and Development report:

‘Governments should seek to contain this inequality at the bottom and top end of the income spectrum. Otherwise, the economy’s progress may be jeopardised by divisive politics, protest, and even violent conflict. If the ethical case does not persuade, the pragmatic one should.’

Things are looking bleak, so why are we spending like there’s no tomorrow? Incredibly, despite the credit crunch, May saw the biggest increase in consumer sales on record. Confused? Read Larry’s article about it here

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Blind faith in markets has not only cost us our future - it could also cost us our heirlooms. The credit crunch has meant that pawn shops are enjoying a new-found degree of popularity. If you’re feeling the pinch, take a leaf out of a Dickens’ novel and check out your local pawnbrokers. Read all about it here.

The brave new world of the New Olympians - the ideas and actors behind the current financial chaos - has now been exposed, but in London the Olympic dream is also crumbling fast. Plans to build the Olympic village for 2012 are now in jeopardy as the credit crunch and sliding housing market means that - once again - taxpayers may now have to step in to cover the extra costs. read the full story here.

‘Incomes have gone backwards in few years since the war, including 1974, 1977 and 1981. This looks like being another.’

Read the full story <a href=”http://www.thisismoney.co.uk/news/columnists/article.html?in_article_id=443449&amp;in_page_id=19&amp;in_author_id=1906″>here</a>.

One of the themes of The Gods that Failed is that the disastrous consequences of the actions of a reckless, largely unaccountable elite are being felt by ordinary people and everyday life. Today the Independent ran an article demonstrating that the chain reaction does not end with people, parents and families – their pets are affected too.

We’ve all heard horror stories about first-time buyers being outbid – ‘gazumped’ – at the last minute by someone with a higher offer, but now housebuilders are suffering the same treatment from buyers: read Dan’s article about ‘gazundering’ here.