It is not Obama’s fault that home sales are dropping, though it is his fault that they did not drop sooner.  Why is it bad that the sales of home and home prices are dropping?

Yes, it eats up bank collateral and destroys individual’s home equity values.  But that is exactly what happens when a bubble bursts and it is what should happen.  To move forward from a financial collapse we need to clear away the debris.

Instead of propping up inflated values we need adjust to the fact that home value appreciation near 10% is not normal.  What we got used to was an induced high.  What we are experiencing is financial sobriety.

We are seeing that even our huge national government cannot keep a fake market alive forever.

We should instead create a market where housing has to compete fairly with other investment alternatives without the subsidies, tax breaks, and political meddling.

Housing will not drop to zero. At some point they will reach a point where the industry will recover. For every dollar one person loses on a home another will gain.  For a president so keen on redistribution this should be welcomed.

An elderly couple comments on Indiana's new ID check law.

After a long day of helping my daughter move into her apartment in Bloomington, Indiana, before classes start we went for a late bite at Applebee’s.  Apparently Indiana has a new law that EVERYONE gets carded if you order a drink.

Yes, even a shriveled up, hunched back, liver spotted, slow shuffling, thin haired, mismatched clothes wearing, near deaf, AARP card carrying, yet innately wise old person must present ID to get a beer.  I doubt if the reason was the extreme costumes young people were using to buy a beer.  The reason is that they just did not want to leave any possible error to human judgment.

Because legislators and bureaucrats do not trust human judgment we are inundated with thousands of pages of laws and rules to accomplish the simplest of objectives.  These rules often have foolish outcomes.

This same law states that if my 20 year old daughter sits at the bar area she must present ID even if she is not drinking alcohol, and must also be accompanied by a guardian.  Yet sitting at the table next to me which I can reach out and touch, which is deemed outside of the bar area, would require no ID and no guardian.

Such micro management creates contempt for the law.  The young people who work at this restaurant joke about how ridiculous it is.  Is this how we want our laws to be perceived?

Yet this is a long trend which, like the analogy of the frog in the boiling water, we just get used to.  It is a quiet tyranny of a government that sees no area it should just leave to the citizens to resolve because it has become very separate and contemptuous of its own citizens.  It is laws like this that makes more and more citizens feel like the government no longer enjoys the consent of the governed.

In a similar story, New Jersey governor Chris Christie explains how his state was turned down for a 400 million dollar federal education grant because of simple, easily correctable clerical error on a single page of a 1,000 page application.

Personally I am glad to see angry voters; it makes me hopeful that we have not lost all common sense.

Post posting note:  apparently there is a little more to the Christie story as pointed out by a reader. The Education Commissioner was caught in a lie and was fired. Read the story here.

The problem remains, however, that we have grown accustomed to thousand page applications and 3,000 page laws.

I have to confess that much of the rhetoric from the right on Muslims in America has crossed a line that I find uncomfortable.  Much of this is centered around the controversies of the mosque proposed a few blocks away from ground zero.

One problem is that Muslims are rarely portrayed in the media except in instances of terrorism or other forms of confrontation.  The danger is to assume that Muslims have no moderate base at all.  I would guess that Muslims would find it indignant to have to defend their faith from the acts of extremists, just as Catholics would reject being labeled by the antics of Mel Gibson or the Jews by the words of Meir Kahane ( of the Jewish Defense League).

Rabbi Meir Kahane

On the Zakaria GPS show on CNN today (8/15/2010), Fareed Zakaria interviewed Irshad Manji and Ayaan Hirsi Ali.  Fareed is a Muslim who questioned Ali as to what extent the radicals were a fringe element.  Fareed believes that the vast majority of Muslims are solid American citizens with American values.

Irshad Manji and Ayaan Hirsi Ali

But the interesting exchange was between Manji and Ali. Ali has rejected Islam totally and accepted Christianity.  Manji, who is a very  progressive feminist remains devout to her Muslim faith yet does not hesitate to chastise Muslim moderates for not being more aggressive in  holding the more radical elements more accountable.

The interview has not yet been posted on the Zakaria GPS site, but hopefully it soon will be.

What we should be careful to avoid is painting all Muslims as a monolithic group with a single voice. Just as with Christians and Jews there is diversity within the Muslim ranks. Many Muslims came to this country to escape the more intolerant strains of their religion from abroad.

Fareed is correct that we would be wiser to encourage the more moderate elements than to remain adversarial with the entire religion.  He explains his position in this video where he voices his support for the Mosque.

We are living in interesting times.  While the professional economists are trying to figure out what happened we have all become economists of sorts just to try and understand the events that greet us every day.

With huge deficits many would expect inflation as another weak willed government resorts to the printing press to solve its problems.  In response we are saturated with ads to buy gold, the default inflation hedge.  Yet I well remember the inevitability of inflation in the 1970’s as gold passed $800 an ounce; only to hit the Reagan/ Volcker wall.  Inflation fell as did the price of gold.  In inflation adjusted dollars gold has yet to recover over 25 years later.

Retired economist Scott Grannis, in his excellent blog, Calafia Beach Pundit, explains how we can be looking at record low bond yields and interest rates while the deficit hits and record levels and  inflation remains tame.  It is a subject that has puzzled me. Read A bond bubble?

Excerpts:

So perhaps there is, in addition to weak growth expectations, an inordinate fear of the future: a fear of big tax hikes, and of a prolonged economic malaise caused by an overbearing state that absorbs the fruits of and smothers the private sector. Japan comes to mind, with its massive deficits, a debt/GDP ratio that has been well into triple digits for years, and sluggish growth. Perhaps it’s the case that as debt approaches and exceeds 90% of GDP the economy simply loses much of its forward momentum, a thesis supported by the findings of a recent research paper by Rogoff and Reinhart. There’s even some support for this thesis in our own history—muddled of course, by WWII—when federal debt surged to 120% in the early 1940s, even as 10-yr yields traded at 2% or so.

If the market is scrambling to buy bonds yielding 2.5% or less, it only makes sense if market participants hold little or no hope for a better alternative in the foreseeable future on a risk-adjusted basis.

It also makes sense that today’s almost-zero yields on cash, extremely low yields on risk-free bonds, and massive debt sales become in a sense a self-fulfilling prophecy. Low yields represent very low hopes and aspirations on the part of the private sector, while the bonds being sold and the money absorbed from the private sector by our federal deficit are being used to fund a level of spending and wealth redistribution such as we have never seen before.

We’re not witnessing a bond bubble in the making, we’re living in a statist nightmare.

Issues like the GZ Mosque provide excellent fodder for the talking heads of the right and the left because it provides them with demons, and they both prefer demons to solutions.

Demons get people worked up and when their blood gets worked up they listen, write, call and participate,  which sounds like “ka-ching” to the media.

Such convenient demons gets to prove to the left how prejudiced and narrow minded the right is and it serves to prove how naïve and unpatriotic the left is.  Such episodes just serves to fossilize convenient stereotypes.

But I would surmise that the great middle, which is becoming less loyal to either party couldn’t give a rat’s ass about the mosque. Nor could they care about whether Obama is a Muslim, where he was born, whether 9/11 was a conspiracy, or whether UFOs exist. This is all just noise for people who want a demon to punch rather  than to face the problems that require thought, decisions, and sacrifice.

That facts are that the real problems we face are difficult.  The depth of these issues are rarely addressed on any major network, because most people have become digital ADDs with an attention span that only lasts in the space from one text message to the next.

I would also guess that what will truly motivate the voters are concerns over unemployment, debt, the economy, the government fiddling with their health care, and the declines in their home equity values and 401k balances.

They are largely moving beyond black and white, male and female, young and old, and red and blue.  They realize that the same government that failed on so many levels is not likely to become better by becoming bigger.

The want common sense and they want their freedom. It may remain to be seen which party delivers this, but it isn’t the party in power now- or at least as we now know it.