Did you expect anything different? Today's latest housing numbers show a situation that's going from worse to ... um ... let's just call it worser.

Today, the Census Bureau reported that September 2007 privately owned housing completions were an incredible 31.1% below the September 2006 rate. Looking forward, housing starts dropped 30.8% below the prior-year rate. Analysts who've been calling the bottom of the housing bust -- such as Citigroup's (NYSE:C) now-notorious Steven Kim -- are likely to look silly for a long time to come.

In the abstract, the reduction in starts should be the beginning of a good thing, a signal that builders are finally scaling back and no longer dumping so much inventory on an already-glutted market. Oversupply in the face of slacking demand has forced the likes of D.R. Horton (NYSE:DHI), Ryland Group (NYSE:RYL), Toll Brothers (NYSE:TOL), and others into major price reductions, including auctions.

But the key questions are: How much more will they fall, and which of these builders will survive long enough to benefit down the road? We've got months of inventory to work through, and years worth of stunted growth ahead. But the builders -- those poor chaps have got bills to pay, and without starts and sales and completions to produce cash, debt holders are going to be itching to get their money, or, in its absence, a pound or two of corporate flesh.

Worse yet, there's little point in appealing to the benevolent government printing press. Inflation is clearly on the prowl, as the latest consumer price index numbers show. Even these wishful-thinking figures (which tend to exclude or skew real-world expenses in ways that are difficult to measure or politically inconvenient to report) peg year-to-date inflation at a 3.6% annual rate, meaning Helicopter Ben Bernanke and the Federal Reserve risk igniting prices well beyond their, or anyone's, "comfort zone" if they decide, once again, to try and bail out Wall Street and the desperate real estate industry with another dose of cheap money.

As I noted yesterday, there's no free lunch out there. When you suffer through the "creation" of billions of dollars worth of bubble-equity "wealth," there's no way to save it when the lending game on which it was built stops running. It may be time for certain segments of America's economy to stop crying, quit the blame game, and take their lumps. Capitalism is supposed to be self-cleansing. Let the scrubbing begin.