The Theroxylandr in Flame

First of all, why do I comment on real estate bubble in my political blog? I think the movement in the housing prices is the most important thing happening in our economy in the last 3 years. Construction created millions of jobs and lifted commodity prices, mortgage refinancing injected hundreds of billions of dollars into consumption, wealth effect is driving people crazy into negative savings. In short, the whole nation is consuming more than it is producing as real estate creates paper wealth.

So, when the bubble had popped? Interesting thing is that many people expect something similar to Nasdaq dropping 5 times from 2000 to 2002. This may never happen with real estate, as any slowdown kills liquidity and just prevents people from selling. Moreover, many people just can't sell as they own more of mortgage then their house is worth. The prices decline just 3-5% every year, but for several years in a row. This is called slow bleeding.

Let just look at the mortgage applications graph:

After hot 2005 we see a normal seasonal decline in December and then sharp rebound in January. Then a drop after feds raised in late January to 4.5%. Currently, mortgage applications are trailing 2005 by 15% and the gap is slowly widening. The purchase index declined 13% from January and is slowly trending down.

What's the answer to my question, when the bubble popped? I think it never popped and never will, instead, it is slowly deflating and will continue to deflate in the years to come.

This time desperate whistleblowers seem to be surrounded. Commander Alito hits the target with graceful accuracy. Keep watching.

As you know, the Westboro Baptist Church was picketing the funeral of the soldiers killed in Iraq with messages like "God is America's terror", "Thank God for dead soldiers" and "You're going to hell". They suggest that God is killing our young boys in Iraq for Bush not being tough on homosexuals.

Just another illustration on how far the Church is from its founder, Jesus, who was teaching that love is above all. If the Lord of Hell is indeed alive, then Westboro Baptist Church is his messenger. Amen.

While Hayden is passing senate I want to point out to some horrible things that are happening with our freedom, if you still know what it is.
As reported here,  DOJ and FBI are secretly wiretapping journalists in order to reveal their confidential sources, or what we call whistleblowers. There is a good article on that here:

Anyone who still believes that a free press is important to America, and that whistleblowing is crucial to a functioning democracy, should be appalled and worried about this new Bush administration step towards dictatorship, which like all the earlier ones is being cast as part of a fraudulent "war" on terror. 

So is Rove indicted or not? Why there are only denials and no reports? Simple. He was indicted but is bargaining a plea deal, which is still refused by Fitzerald. It could take a while, so be patient. Read

Thank you Mr. Patrick Fitzgerald. America stands on people like you. Thank you.

Fortunately for Bush, the last day scandal did not took as much as public interest as the last year wiretapping revelations. But, look how much more of interest the NSA has in the last few months.

On this graph from google trends, red is NSA, blue is wiretapping.

USA today reported that 200 million phone calls of American citizens were unlawfully recorded by CIA. That's what I already reported back in January.

I'm glad to see that now even the Republican stronghold, the GOP, is joining the anti-Bush election campaign. Executive Director Mark Stephens is saying that electing Democrats in the Congress will accomplish the following tasks:

1. Improve the fiscal responsibility of the Government
2. Investigate the unwarranted and uncontrolled wiretapping of phone calls of American citizens
3. Investigate the origins and conduct of Iraq war
4. Bring those responsible to account

Assuming that 69% of population, sick and tired from president Bush, wants to do exactly that, I should say the GOP leadership is outlining the task to accomplish extremely well.

GOP, my heart is with you! 

Two problems that were bothering economists are finally addressed by Bush administration, in a radical yet effective fashion.

First problem is social security, which is tuned to sertain proportion of working and retiring people. With a hord of boomers heading into new life where they plan to continue using space and resources but produce no goods, the system is doomed. The goal is to prevent people from retiring, for their own good.

Second problem is illegal immigration. There is a space in economy for 400k $5/hour jobs and those positions have to be filled. So far the only way to do that is to use illegal immigrants.

The ongoing deflation of the housing bubble seems to be addressing both problems surprisingly well. The consumer credit bubbled to incredible size with the interesting psychological effect of paper wealth. Tens of million of people who believed that the rising nominal value of their houses warrants increasing spending will find themselves with absolutely no retirement savings. They are not bankrupting nor leaving the middle class, but they just will never retire. They will pick simple and low wage jobs in retail, call centers, etc. Senior talents, welcome back to economy!

Another million or two will find themselves owing to the mortgage creditor more then their home is worth. All of those people will eventually default, some of them this year, some of them few years from now. They will constantly fill those desperate $5/hour positions, they are cornered to do so. Mexicans, we don't need you anymore!

Thanks Bush for fixing those problems, really appreciating.