The Poor Get Richer.

I swore I wouldn't jump into the muck & mud of politics on this thing, mainly because it is like religion, it's an argument that cannot be won. I just see people who engage in endless political debates on any side, as unable to divine the fundamental truth that whatever side they are on and whatever point they choose to argue, they cannot win.

Extended political debates are like watching 3 year olds argue whether green or orange is a better color.

That said, the political face of this country is starting to resemble the hated Cali-Banger. Extreme in all regards. Not just big titties, but only the Biggest Titties On Earth will do. Not just a nice big car, but a fucking SUV that blots out the Sun. Not just a house too big, but a McMansion that is an gaudy abomination to pocketbook & neighbor alike.

Politicos seem to think that they are in a tug-O-war, pulling mightily for the control of The Vast Center. That if they are extreme enough, they will influence the vast hordes of moderates to go their way.

Libs see themselves as enlightened scholars and the vast middle as mentally pliable dullards. The RePugs see the middle as politically nomadic wildebeats to be turned to their will, or eaten. Strangley, religion seems to be the weapon of choice for both.

But again, I simply see a contingent that is wandering away from the middle, which is fine. But there is no rope. Extremist loonies actually make me go the other way.

I don't have cable at home, but the short exposure on cable-TV-enabled vacations I had to the clearly obvious right-wing ravings of CNBC were the most convincing arguments for the left I've seen in a long time. Now, the "I Told You So, Those Right Wing Fuckers Are Wrong On Everything!" lib retort is the best way to push me back to my comfy, cozy rePug roots.

And I must say, that one of a few scenarios must be true: Either Bend is FULL of extremists, or I attract Lib's like flies, cuz I don't know anyone who is just a calm moderate centrist. And by that I mean someone who has a thoughtful reason for backing whatever it is their political beliefs are.

For example, not that I am thoughtful, but I am pretty party-line Reaganesque RePug, but I do not think abortion should be outlawed. Abortion is going to happen, one way or another. Period. RePugs who don't understand that are confusing their idealism with the pragmatism of the individual. Plus, I do not believe I should blithely make political decisions regarding a womans body. More accurately, I don't believe abortion should be a political decision. It's an individual decision, not mine or some politico whore.

And ALL my lib friends use THAT example as some sort of rationalizing for ALL lib political viewpoints, and that I should see the light on ALL OF THEM, like I have BABY KILLING. No.

And equally heinous RePugs, like my beloved sister, who was a devout Dem supporter until Monicagate, are aghast, wondering why I am in league with SATAN.

Oy.

I guess my opinion on politics is that the extremists seem to think that they are engaged in a titanic debate with the enormous mass of the middle ready to roll down one side of the mountain or the other, when in reality there is no vast middle being influenced. If anything, many are repelled to the other side.

Many are flying the flag of the Cal-Banger ethos, Extremis delectatio morosa. You can see the pointlessness when these sides clash:

http://www.youtube.com/watch?v=nYlZiWK2Iy8

OK, enough of that shit, that makes me wanna puke.

I saw a short, interesting piece in The Economist:

The housing wealth effect

ANOTHER housing crisis meme circulating is that much of the recession's pain can be explained by the consumption impact of falling housing wealth. It's a pretty attractive storyline; homeowners feel rich based on their home's paper value and therefore buy more, or they actively use paper housing wealth to fund consumption via home equity loans.

Then, when housing prices fall that wealth disappears and national consumption craters. The problem with this line of thought is that falling housing prices mean falling housing costs for renters, who experience the crash as an increase in their real wages. Rising consumption from richer-feeling renters should partially or entirely offset falling consumption from owners.

New research on the euro area by Ricardo Sousa seems to support this second view of the housing wealth effect:

This paper estimates the wealth effects on consumption in the euro area as a whole.

I show that: (i) financial wealth effects are relatively large and statistically significant; (ii) housing wealth effects are virtually nil and not significant; (iii) consumption growth exhibits strong persistence and responds sluggishly to shocks; and (iv) the immediate response of consumption to wealth is substantially different from the long- run wealth effects.

By disaggregating financial wealth into its major components, the estimates suggest that wealth effects are particularly large for currency and deposits, and shares and mutual funds.

In addition, consumption seems to be very responsive to financial liabilities and mortgage loans.

It isn't the case that falling housing prices can have no effect on the broader economy; they certainly do. It's merely the case that the effect of falling housing wealth on consumption is not the main pathway for an interaction between declining housing values and output.

I find this interesting I guess because it describes me. I don't own a home, and the attending mortgage, plus the recent stock market rebound has done wonders for my net worth.

All this plus the fact that I sort of positioned myself delta-positive for a decline, and I am better off financially than I have been in years. Maybe ever. Hard to say, as I have had homes & businesses acquired with debt, and getting a bead on these illiquid financial assets was only really possible upon their liquidation, which is strangely an event that makes me feel poorer.

So I am spending. A lot. And that's a relative statement, I guess. As I said I don't have cable. Until recently I had a 1950's era TV. But I am buying books. Going out to eat, once in awhile (Sno Cap in Redmond). I do more than single-mindedly walk through the grocery aisles at Costco. Bought my wife a blender a few weeks ago. All this, and I have enough in the bank to survive 18 months with zero income.

I guess THAT is what makes me feel rich: I can live a LONG TIME with what I have, and make all my financial committments. Which are not many. Well... maybe THAT'S what really makes me feel rich: I don't owe much to anyone.

And that was definitely NOT the case in years past when I had a nice big home I owned, or a business that certainly made me feel rich as I cycled through a fairly decent chunk of change each month. I could not have survived those times with my financial resources for more than a few weeks.

So my asset-base is far scaled down now. And maybe in some technical sense, my net-worth is lower now than it may have been in the past. But my debts are almost non-existent, which hasn't been the case since I started college. And THAT is what gives me a very serene state of mind.

And that is why I am "spending". Which basically means I am saving 50% of my income, not 55%.

And it took almost 2 years, but they finally dropped the prices enough for me to buy a game console! Wii-Hoo!

But I still don't have cable. That's a monthly check I still don't want to write.

So I'll end it this week with a great piece from The Economist:

Where it all began

Signs of stabilisation should not obscure the big problems still ahead

HE IS hardly your typical distressed seller. Hugh Hefner recently sold his personal residence in Holmby Hills, California, next door to the Playboy mansion, to a 25-year-old entrepreneur for $18m--some 36% below the asking price.

It will come as little solace to the ageing Lothario that the discount looked about right: house prices have fallen by one-third from their peak nationwide, and by much more than that in the worst-hit states, such as California, Florida and Nevada.

Although global financial sickness first erupted in American residential property, thanks to ludicrously lax subprime lending, policymakers have recently seemed more worried about asset classes to which the infection subsequently spread.

When the Federal Reserve this week extended the life of a facility to support asset-backed securities, for instance, it was more out of concern for commercial property than for housing. Nevertheless, observers agree that America's economy--and all those banks still saddled with underperforming mortgages--will struggle to recover while house prices are still falling.

The Obama administration's economic successes "will be for naught" if the housing free-fall continues much longer, says Mark Zandi of Moody's Economy.com. Hence the excitement over some recent, albeit tentative, signs of stabilisation.

The S&P/Case-Shiller index, which tracks home prices in 20 cities, ticked up slightly in May, its first gain in 34 months. New construction of single-family homes rose in July for the fifth straight month.

Sales of existing homes are expected to show their fourth consecutive month of gains when latest numbers are released on August 21st (see chart 1, right-hand side).

Toll Brothers, a big home-builder, just recorded its first gain in net orders (new orders minus cancellations) for four years. With homes now at their most affordable in living memory, relative to median income, "we've finally found a level where people want to do deals," says Pam Liebman, chief executive of Corcoran, an estate agency.

The revival is largely at the lower end, which helps explain this week's $1.4-billion acquisition of Centex, a home-builder which specialises in cheaper houses, by Pulte Homes. Dig deeper, however, and the recovery's foundations look shaky.

Rising joblessness will continue to weigh on demand for homes. The unemployment rate, currently 9.4%, is expected to peak at more than 10% some time next year.

The economic effect of unemployment is wider: as more and more of those still in work know someone who has lost their job, they will think twice before buying a property. Consumer confidence remains fragile.

For those seeking a mortgage, credit is still hard to come by. The two main federally backed mortgage agencies, Fannie Mae and Freddie Mac, have tightened their standards for new loans (though mortgages handled by their sibling, Ginnie Mae, have fallen in quality).

A Federal Reserve survey of loan officers, released on August 17th, suggested that banks will remain tight-fisted for some time. They are still grappling with growing losses from residential mortgages.

These will not peak until early next year, reckons Betsy Graseck of Morgan Stanley. Moreover, the positive signs in housing are partly driven by short-term factors. One is the tax credit for first-time buyers that was included in Mr Obama's stimulus package: some are rushing to buy now because deals must close by November 30th to qualify.

Annual tax refunds, handed out in recent months, may also have given the market a temporary lift. Attractive mortgage rates helped, too. But these have climbed off their historic lows, despite efforts to keep them down through the Fed's purchases of mortgage-backed securities.

Many expect them to rise further as ballooning government borrowing puts upward pressure on Treasury yields. A glut of supply will also weigh on prices, thanks to a wave of repossessions.

Foreclosures are running at record levels, with one in 355 of the nation's homes receiving a filing in July alone. Seized properties now account for almost one in four sales.

Increasingly, those losing their homes are supposedly safer borrowers with "prime" mortgages. They now account for more foreclosures than subprime borrowers, says the Mortgage Bankers Association (MBA).

With 1.8m homes already in foreclosure, a "similar amount" may be heading that way, reckons Torsten Slok, an economist at Deutsche Bank. Even those states that were the first to feel pain are still seeing a sharp increase in pre-foreclosure notices.

In California one type of notice, for "trustee sales", leapt by 32% from June to July, according to ForeclosureRadar, a website. Even more worryingly, delinquencies, the raw material for foreclosures, are still on the rise across much of the once-golden state.

In Orange County nearly 7% of mortgages are at least three months overdue but not yet foreclosed, up from around 5% at the start of the year. The rise in negative equity--when a borrower's mortgage debt exceeds the value of his home--is also fuelling foreclosures, not least because many would rather walk away than keep making payments on a home that is worth much less than the sum owed on it.

Zillow.com, a property-information service, estimates that 23% of homes with mortgages are underwater. Others put it higher.

A staggering 60% are submerged in Las Vegas. Deutsche Bank's securitisation team expects negative equity to peak at 48% of total homes by 2011.

That may be too pessimistic, but all agree that the number will rise further. This matters because negative equity weighs doubly heavily on home prices, by both weakening demand (it traps potential buyers in their homes) and adding to supply (it often ends in seizure and distressed sales).

Government efforts have done little to stop the rot. Under the main foreclosure-prevention programme, only 235,000 struggling borrowers have had their loans altered to make payments more affordable, out of 4m targeted for help.

Even with a financial incentive to modify, loan servicers remain reluctant. Many borrowers are too deep in negative equity and the redefault rate is too high. "It doesn't help if you're drowning in 20 feet of water instead of 30," says Jay Brinkmann, the MBA's chief economist.

Moreover, the typical troubled mortgage is getting harder to modify because it is more likely to be the result of unemployment than an interest-rate increase.

Bringing the monthly payment down by 20% does not help when the borrower has no job.

Even if the pace of modification quickens, the overhang of unsold homes will remain dauntingly large. The inventory represents 9-10 months of supply, three times the level in a tight market, says Stan Humphries, Zillow's chief economist. Paradoxically, a further wave of supply could crash over the market if it is widely seen to be stabilising. Many homeowners who sat tight while prices fell will try to sell at the first sign of a turnaround, according to surveys.

In one, conducted by Zillow in July, 29% of respondents were at least "somewhat likely" to put their home on the market once the market perked up. The release of this "shadow inventory" could smother the recovery before it gathers speed.

Just as worrying is the possible recurrence of "payment shock" as interest rates on adjustable-rate mortgages reset higher. Resets on subprime loans have mostly taken place, but the worst is yet to come for some other loans, especially the "Alt-A" category between prime and subprime and a nasty type of mortgage called an "option ARM" (see chart 3).

The impact may be muted, but only if the Fed can keep short-term rates very low for the next couple of years--or if the borrowers can refinance as the reset approaches.

Given these downside risks, the recent pop in house prices will probably fizzle. Most economists expect them to fall by a further 5-10 percentage points, to their long-term trend line at roughly 40% below their peak, and not to reach bottom until some time in 2010.

The pessimists predict they will go crashing through the trend-line to as little as half their 2006 high. Analysts at Goldman Sachs, no fools when it comes to housing, hint at several years of stagnation.

They argue that the rate of home ownership, currently just over 67%, will fall back to the 64-65.5% level that prevailed before prices took off in the mid-1990s, cutting deeply into demand for properties.

This view is supported by a recent Fed study, which found that more than half of the boom-era rise in ownership was due to "innovative" mortgage products, many of which are now history.

It could be even worse.

Now that the myth of ever-rising house prices has been shattered, it may be time to embrace another inconvenient truth: that prices can take decades to recover, at least when adjusted for inflation.

A study in June by the Federal Housing Finance Agency, a regulator, pointed out that in parts of Texas house prices still languish some 30% below their 1982 peaks in real terms. Mr Hefner may not have got such a bad deal after all.

hbm, political knob-wanking makes me wet!

Buster, I'm thirsty for verbal abuse!

Dunc watches poolside as women fight for scraps on Free Comic Book Day.