BOSTON (Reuters) - The unexpected sharp drop in new home sales in the United States last month, coupled with rising mortgage delinquency rates, illustrates the delicacy of the current economic recovery after a brutal downturn.

The bursting of the housing bubble -- which had been inflated by a lax credit environment -- set off the worst U.S. recession since the Great Depression of the 1930s.

While the economy shows signs of bottoming out, the surprise 11.3 percent drop in new home sales in November suggests Americans are still treading cautiously around major purchases, with recovery still tied to government money, analysts and investors said on Wednesday.

"Many people are looking at the rally in the stock market as a typical V-shaped recovery, that what worked before is going to work again," said Keith Springer, president of Capital Financial Advisory Services, a money manager in Sacramento, California. "They are not taking into account the demographic cycle that is changing. The biggest thing going on is you have an aging demographic turning from net spenders to net savers."

Retirement-age Americans, many of whom have seen the value of their savings decimated by the drop in stock and house prices, are selling the large homes they raised their families in and buying smaller, more affordable dwellings.

The Dow Jones U.S. homebuilders index was flat on Wednesday after running up 10 percent over the previous five trading days, sharply outpacing the 1 percent rise in the Standard & Poor's 500 index.

BEIJING/DETROIT (Reuters) - Ford Motor Co (F.N) said on Wednesday it is nearing an agreement to sell its Volvo Swedish cars unit to China's Geely in a deal that underscores China's arrival as a major force in the global auto industry.

The deal, which Ford said it expects to sign in the first quarter and close in the second quarter of 2010, would be the largest acquisition of an auto brand by a Chinese company.

It comes at the end of a year that has seen China overtake the United States as the world's biggest auto market in a reversal of fortune that would have been unthinkable only a few years ago.

Traditional Ford rival General Motors Co GM.UL, meanwhile, is moving to abandon its own Swedish brand, Saab, after selling some assets to another Chinese automaker, Beijing Automotive Industry Holding Corp or BAIC, for $200 million (125 million pounds).

Beijing has imposed a tariff on European steel products, such as nails and bolts, as a trade row with Brussels escalates. A day earlier, the EU had decided to extend a levy on the import of shoes from Asia.  

The Chinese commerce ministry said Beijing was "strongly dissatisfied" with the European Union's decision to extend a ban first imposed three years ago by a further 15 months. It said that the country would take the matter to the World Trade Organization (WTO).

"The Chinese government ... will appeal to the WTO dispute settlement mechanism and take measures accordingly to seriously protect the legitimate interests of the Chinese industry," ministry spokesman Yao Jian said.

The European Commision said that contining with import taxation into 2011 would give European firms the necessary protection to adjust and be competitive in global markets.

In a SPIEGEL interview, London banker and lay preacher Stephen Green, group chairman of HSBC, discusses the divide between his Christian faith and the pursuit of profit, the morality of being involved in the subprime mortgage business and whether he and his fellow bankers have learned anything from the financial crisis.

SPIEGEL: Mr. Green, when was the last time you were ashamed to be a banker?

Green: I haven't felt ashamed when it comes to my own work. However, over the past few years there has been a portion of the global business that was simply unacceptable. Some financial products were much too complicated and not transparent enough. Moreover, they were sold to people who often had no idea what they were buying. This sort of business was very successful for a few years, but it resulted in catastrophe. In this respect, it was disgraceful for all of us.

SPIEGEL: You are not just the group chairman of Britain's HSBC, the world's largest private bank. In your free time, you also serve as a lay preacher in the Anglican Church. Have you ever prayed: "Please God, rescue capitalism"?

Green: Well, I was certainly never at a point at which I felt that it was so diabolical that it ought to be abolished. All economic systems have their faults and capitalism is the best of a bad bunch -- that is even though, only a year ago...

The Brits usually aren't too thrilled about anything German trying to make its way across the English Channel. But there is one exception. Each year, German Christmas markets take over the downtown pedestrian zones of a growing number of British cities. The biggest one -- and perhaps the biggest one anywhere outside Germany -- is in Birmingham.

"Smells good," the man in the gray trench coat says. But is he talking about the Glühwein or the bratwurst? "The mix," he says, as he breathes in the cold winter air -- this matchless "German mix." The city hall of this British metropolis of more than a million people bears a sign with large lit letters reading: "Happy Christmas Birmingham." In front, a German flag is waving, and a yellow pennant flying above the "Knobi Satt" stand promises filling garlic bread.

Each year, dozens of small wooden stands are set up in the pedestrian zone of Birmingham, England. The Frankfurt Christmas Market is imported in toto by container ship from Germany -- bringing a touch of Germany to Victoria Square. You can find Aachener Printen ginger bread treats, Christmas Stollen cakes, nutcrackers, lambskin slippers and wooden toys -- just as you would at the real Frankfurt Christmas Market on the city's Römer square. Glühwein -- which is German for mulled wine -- is even served up in mugs emblazoned with the Christmas market's logo. Heart-shaped Lebkuchen ginger bread hearts are frosted with words like "Schatzi," or "sweetie." The price lists are even written in German. The only difference between a Christmas market here and one back in Germany is that you have to pay in pounds.

Although there is always a risk in making projections into the future, it is evident to me, anyway, that the US is no longer the principal motor of the Latin American region as a whole. Perhaps we have finally become immune from catching the flu every time the United States sneezes.

"As we have seen so illustriously over the past year, all Ponzi schemes eventually fail under their own weight. The US debt scheme is no different. 2009 has been witness to spectacular government intervention in almost all levels of the economy. This support requires outside capital to facilitate, and relies heavily on the US government's ability to raise money in the debt market. The fact that the Federal Reserve and US Treasury cannot identify the second largest buyer of treasury securities this year proves that the traditional buyers are not keeping pace with the US government's deficit spending. It makes us wonder if it's all just a Ponzi scheme." Eric Sprot

Readers may have noticed Janet Tavakoli's recent article at Huffington Post on Goldman Sachs and AIG. While much of it covers territory that Yves and I already wrote about previously, Ms. Tavakoli stops short of telling the whole story. While she is very knowledgeable of this market, perhaps she is unaware of the full extent of the wrongdoings Goldman committed by getting themselves paid on the AIG bailout. The Federal Reserve and the Treasury aided and abetted Goldman Sachs in committing financial and ethical crimes at an astounding level.

She notes, accurately, that Goldman used AIG to hedge its bet on CDO's, either for itself with the Abacus deals, or for its clients, with the Davis Square deal. Had AIG failed, Goldman would have been on the hook for the losses: to execute the CDO with synthetic mortgage bonds, Goldman went "long" the CDS and then turned around and went "short" with AIG, effectively taking the risk of the mortgage bonds defaulting and then transferring it to AIG.

But Ms. Tavakoli fails to note that the collapse of the CDO bonds and the collapse of AIG were a deliberate strategy by Goldman. To realize on their bet against the housing market, Goldman needed the CDO bonds to collapse in value, which would cause AIG to be downgraded and lead to AIG posting collateral and Goldman getting paid for their bet. I am confident that Goldman Sachs did not reveal to AIG that they were betting on the housing market collapse.

To help hasten the housing market collapse, Goldman ran a huge mortgage lending and issuance program with low quality loans virtually designed to fail, including dozens of deals backed by completely toxic non-prime second lien loans (these loans help pump up the housing bubble and let borrower's suck the equity out of their homes). In soliciting AIG's insurance for the CDOs, Goldman was not disclosing that the transaction was highly speculative. Goldman was offering AAA, or even super AAA bonds. Goldman designed and sold these bonds and purchased a rating from the rating agencies that represented the risk to be AAA. In fact, the bonds did not provide real protection, despite their AAA rating, and when the housing market turned down, the AAA CDO bonds collapsed in value exactly as they were designed to do.

Goldman never wanted these CDOs to succeed - their bet depended on them failing. This is why they used AIG as their insurer - AIG posted collateral, which enabled Goldman to still get paid even when AIG inevitably got downgraded for taking on such toxic deals.