National average house price to drop this year

And, possibly, for the next two years.

I would change that “possibly” to “probably.” And, more and more people are predicting a recession of some sort, even if they refuse to use the “r” word.

While the housing slump has already rattled financial markets, it has so far had only a modest effect on consumer spending and economic growth. But forecasters now believe that its impact will lead to a slowdown over the next year or two.

“For most people, this is not a disaster,” said Nigel Gault, an economist with Global Insight, a research firm in Waltham, Mass. “But it’s enough to cause them to pull back.”

Combine the fact that much of consumer spending this decade has been credit-based, and the primary source for that spending has been home equity loans, and it’s pretty easy to understand how a recession could be just around the corner.

The only question is, how bad of one?

Plus, how mentally equipped is the Fed to deal with this? After all, our current fearless Fed flack, Ben Bernanke, when a Bush advisor in 2005, said:

“Strong fundamentals” were the main force behind the rise in prices. “We’ve never had a decline in housing prices on a nationwide basis.”

Guess what, you credit-inflating junior Greenspan sack of shit? We do now!

Cry me a river, Michael O’Hanlon

I won’t eat up too much space here on his , puerile response to critics of his and Ken Pollack’s original op-ed saying everything is hunky-dory in Iraq.

I will quote one comment, though:

Unfortunately, much of the blogosphere and other media outlets have emphasized the wrong question, challenging the integrity of anyone who dares to express politically incorrect views about Iraq. (My emphasis)

His views aren’t politically correct to the Bush Administration that he and Ken Pollack try to give intellectual props to, every chance they get.

And, this bullshit that somehow, after hunkering down in the Green Zone in Baghdad for a week, he and Pollack are somehow “daring,” is ludicrous.

I’ve said more than once that Brookings is NOT a liberal think tank. It could prove otherwise by canning people like O’Hanlon.

A very unlucky non-Friday the 13th looming?

I wouldn’t want to be in the West Bank or Gaza Sept. 13. Why?

Rosh Hashanah, the Jewish New Year, starts the evening of Sept. 12, according to the modern Western/Christian Gregorian calendar, and runs through the daytime hours of Sept. 13.

Ramadan, the Muslim month of daytime fasting, starts Sept. 13.

Can you say “potential for explosiveness”?

Dear Lancaser School Board:

Aren’t you in part to blame for a district having no financial reserve? Yes, Superintendent Larry Lewis prepares the budget each year, but you’re the one who votes on it. That includes voting this year on a budget with no salary itemization. It’s bad enough not to have teacher salaries itemized, but given that LISD is well above the state average in percentage of income spent on administration, you are very much signing off on a blank check without those salaries being itemized.

Top Swiss banker agog at U.S. lending standards

Credit bubble looks more and more globalized

Roth says story is just beginning:

“We’re certainly not at the end of the story. There are question marks surrounding the development of the American economy,” Jean-Pierre Roth, president of the Swiss National Bank, said. “Something unbelievable happened. People who had neither income nor capital got credit with very attractive conditions. Now reality is striking back,” he said.

Meanwhile, an American financial analyst says not all of the collateralized debt obligations have been priced to market, so we still don’t know exactly how serious things are.

Stockmarket historian David Schwartz warned investors not be fooled by signs of recovery. “The truth is no-one knows how serious the financial problem in the US is, nor how it will unfold. We do know central banks are scared out of their minds,” he said.

The credit bubble Roth says became global because foreign banks either followed the Fed’s lead or inflated their countries’ credit for their own reasons, as with Japan.

In parallel, the Bank of Japan held interest rates at zero for six years until July 2006 to stave off deflation. Even now, rates are still just 0.5pc. It also injected some $12bn liquidity every month by printing money to buy bonds. The net effect has been a massive leakage of money into the global economy. …

Faced with an asset shock coming from Asia, the Federal Reserve and the European Central Bank could have taken counter-action. They did not do so. Nor did they tighten much to offset liquidity being "created" by the new-fangled credit instruments. The Fed held rates at 1pc until June 2004, when the economy was growing at 5pc. The ECB kept rates at 2pc until December 2005. It takes 18 months - or so - for monetary policy to exert its full effects. The bubble peaked in early 2007.

The central banks have said their task is to fight inflation, not to police asset prices. Critics retort that the US asset bubble in the 1920s and Japan's bubble in the 1980s both occurred at a time of low inflation. Belatedly the Bank of Japan, the ECB, the Swiss, the Scandies and the Bank of England are questioning the wisdom of ignoring asset prices, deeming it wise to "lean into the wind" to slow excesses. But it is very late in the day. The credit bubble is already with us.

And, that’s why this thing isn’t going to go away overnight.

Also, related to that, if Bernanke seriously cuts the Fed funds rate, other countries’ central banks will look to their own houses. Just like warring tariff hikes exacerbated the Depression, warring rate manipulation may do the same for the credit bubble.

Stephen Harper takes page out of Bush playbook

Canadian PM alleged to have used police provocateurs to inflate crowd reaction at the recent U.S.-Canada-Mexico summit.

The Mounties and Quebec provincial police deny using agents provocateurs at this week's Montebello summit, despite video evidence that suggests undercover cops tried to incite violence.

The three alleged provocateurs were caught on camera with bandanas masking their faces and at least one carrying a rock in his hand – approaching a line of Surete du Quebec police in full riot garb. They refused to back away, despite the insistence of Coles and other protest organizers that they leave the area.

As protesters surrounded the men and tried to snatch off their masks, one of the three spoke to an SQ officer. The trio got through the police line, were forced to the ground and handcuffed.

Photos of the men lying on the ground show the three were wearing combat boots with identical markings to the ones worn by an SQ officer kneeling beside them.

The denials Wednesday did nothing to quell mounting outrage over police tactics. Anti-globalization and union activists joined with opposition politicians to demand an independent investigation.

Hard to believe another country freely elected someone almost as bad as Bush, but, from stuff like this to fundamentalist Christian evolution deniers in his Cabinet, Harper is that person.

My thoughts on the nuttery of a liberal political mag ranking Texas A&M as the nation’s No. 1 university

I e-mailed both Kevin Drum, Political Animal’s blogger, and Washington Monthly editor Paul Glasris the following comments about WM’s annual college rankings, apropos Glastris’ explanatory note, the rankings listed here and blogged about here.

I said:

Why is ROTC rank used as a marker for service?

As someone who lives 20 miles down the road from College Station (for only one more month, thank doorknob, before it's back to my old newspaper company in Dallas), I can testify to the cult-like nature of the Aggies' 12th Man.

Besides that issue, and the related issue that ROTC as a marker favors conservative universities (which A&M is in spades) as a marker from a LIBERAL magazine (hello?), I think it's also arguable whether ROTC, versus the Peace Corps, is actually a service organization at all.

Why not, instead, rank universities on numbers of hours of community service required to graduate, or get admitted from high school, or something, to the degree such standards exist?

I saw that the same rankings had Virginia Military Institute No. 5 among liberal arts colleges. To what should be nobody’s surprise, and definitely isn’t mine, it’s No. 1 in ROTC.

A final, post-subprime bust kick in the crotch from the IRS

If your house gets repoed because you can’t keep up on a mortgage, the IRS
wants to tax the amount of the debt you had eliminated.

Foreclosure is one way that beleaguered homeowners can fall into this tax trap. The other is when homeowners are forced to sell their homes for less than the value of the mortgage. If the lender forgives that difference, they are liable for income taxes on that amount.

The 1099 shortfall, as it is called, stems from an Internal Revenue Service policy that treats forgiven debt of all types as income even if the taxpayer has nothing tangible to show for it, unless the debt is canceled through bankruptcy.

The Center for Responsible Lending expects that 20 percent of the home loans made in 2005 and 2006 to people with weak credit, commonly called subprime loans, will end in foreclosure. Because so little money was required as a down payment during the boom, the value of many of these houses may be less than what is owed.

Some people in this predicament are fighting the I.R.S. and winning. Sometimes, lower payments can be negotiated with the I.R.S., tax experts say.

In other cases, bankruptcy or a claim of insolvency can eliminate the tax burden.

Even though you may have some legal recourse, in general, this is ridiculous and non-sensical. And, it’s punitive, as well as being stupid.

It will also contribute to more of an economic downturn, taking more money to buy things out of peoples’ pockets.