See note here on Bush tax cuts lead to soot. Then this:

Consumption inducements, via financial tweaks (pun intended to methhead tweakers), like that of zero percent loans circa December 2001 for SUVs and ARMs for homes, like 2000 forward, are so radically weird that they are not development but rather financial cannibalism. Imagine a New Yorker pushing Soylent Green as "plankton."

Image that a home's price was pegged to wage income and had a value, an investment value, pegged to rental value. This might disrupt the political saleability of the notion that the middle class has a shared interest with the filthy rich on -- cough -- capital gains. Homes are not investments, except as as rentals or as an excuse for extracting one-third of the income of recent buyers and renters alike for interest (this one-third of income is the equilibrium or fulcrum).

The bubble price of homes, for new entrants rather than for the seekers of capital gains, above the rental-justified-value not only acts as a real reduction in the ability of folks to save (i.e., genuinely save) but pushes the cost of labor domestically through the roof as compared to places like China. It could be said that our dysfunctional treatment of homes as speculative piles of pixie dust (divorced from wages or real income) upon which to link to individual debt is what gives China a compelling competitive edge.

China was intimately involved in international trade long before Adam Smith landed on the historical scene to rationalize things as they were in his day. If I were a Chinese economist I would surely identify the US consumer's penchant for spending when they feel wealthy by pointing to a bubbling of their home's latest valuation, however fleeting it may be, and then set out to exacerbate that problem, or competitive advantage, depending on perspective. Here, Mr. Bush's home "ownership" drive and Mr. Sten's drive to raise the taxable price of assets (the speculative price of "residential" homes not given arbitrary exemptions) are on the very same page.

Sten is the chimp's side-kick, because he enables Bush to give tax breaks by increasing his own local taxes, and pledges our wages to guarantee a positive rate of return to the bond buyer buddies of Bush -- who are flush with new dollars to invest. The human desire to gamble, here on the speculative appreciation of homes, is just too alluring for Sten.

But now we not only have our own local disequilibrium between wages and home prices to deal with but the compounding complexity of the diminishing competitiveness of our labor to that of China. So we continue to boost home prices, extract the equity, and buy more Chinese made goods . . . I should call this the "Sten cycle of life." It starts with plankton at the bottom, not the top, of the food chain. (Or should I call it the Gretchen Kafoury cycle of life; via landlord subsidies as the means to house the poor, the increasingly more numerous poor.)