The market response to QE3 has been different than to the first and and second rounds of "quantitative easing." It’s subdued this time.

The initial upward burst in stocks has fizzled, and the run to commodities by those either fearful of inflation or hoping for it has also stalled. The 10-year Treasury note jumped almost to 1.9 percent from summer in the 1.5s, but has now retreated to 1.75 percent.

Only mortgages have behaved as expected, sitting at or slightly below the 3.5 percent all-time low, depending on the deal.

The usual weekly run of data on the current economy shed no new light, but deeper reports on credit and housing did enlighten, as did — may the saints preserve us — news from domestic politics.

Republican columnist David Brooks this week nailed Mitt Romney as behaving like Thurston Howell III, the clueless ascot-throated boob of "Gilligan’s Island." Romney had done poorly while cast as a Wall Street sharpie. Boob is fatal.

Measured by the flow of campaign money, businesspeople have been the largest (only?) segment of the electorate to depart Obama for Romney, and I doubt they have processed Obama’s now likely re-election. What impact might awareness have on expansion and hiring?

A hint at an answer overseas: After his inauguration on May 15, new French President Francois Hollande proposed to cut the 2013 budget deficit by 30 billion euros, about 1.5 percent of GDP. The cut will be funded one-third by spending cuts, one-third by new taxes on business, and one-third by taxes on the rich. Since the announcement, new business in France has suffered its largest drop since the free-fall in 2009.

Every 90 days the Fed releases Z-1, its compilation of every nickel rolling and landing in the U.S. economy. Some good news: The net worth of U.S. households is today only $3.5 trillion below its 2007 level, and up $9 trillion from its 2008 nadir. But 80 percent of the gain has been from stocks, a paper loss and rebound. Home values are still rumbling along bottom, little changed from the initial $7 trillion loss.

Household liabilities have fallen more than $1 trillion, all in the mortgage account. Second mortgages (all types) at first fell slowly from $1.1 trillion in 2007, the pace now accelerating (via foreclosure and short-sale wipeout), down to $813 billion. Trash mortgages crested at $2.2 trillion in 2007, and this fall will drop below $1 trillion.

Mortgages guaranteed by Fannie, Freddie and FHA/VA have been remarkably steady at $5.8 trillion. That pattern requires some thinking. The Fed has bought $1 trillion. The refi churning is a null set. Amortization knocks down the balance, but not much.

Loans for home purchase add to the account, but only as they exceed payoffs from sales. There is no alternate supply of mortgage credit. Those who dream of privatized mortgages might glance at another Z-1 line: Banks have dropped first mortgage holdings by 20 percent since 2007, the remainder only 43 percent of the government-sponsored sum.

The apparent stability in home-mortgage balances overall, outstandings down only from $11.2 trillion in 2007 to $10 trillion today, is misleading.

By all accounts some 20 percent of the remaining balances are underwater. They present both as a future loss and an inert supply not available for new transactions.

The actual, in-practice decline in supply has been on the order of 35 percent, and trying to get a new loan from Fannie makes all borrowers and mortgage bankers themselves feel like new-age Willie Suttons.

Nevertheless, prices of homes are beginning to rise. Some of the rising news is statistical artifact.

The National Association of Realtors reports that the distressed fraction of sales of existing homes fell to 22 percent last month, down from 49 percent in 2009. No matter how analysts try to adjust prices for distress, fewer of those homes selling unquestionably makes price increases look better than they really are for individual homes.

Ignore my quibbling with stats. The one, single patch of sunshine in this economy is prices of homes rising to any extent. Every dime up is a dime less underwater.

And the 5 percent miracle approacheth. Five percent appreciation means that I can at last hire a broker and roll my equity into the new place I’ve needed for years and years. That’s how housing sales numbers will rise, probably for a long time ahead.

QE3 has awakened the inflation worrywarts, led by Richard Fisher, the braying jackass at the Dallas Fed (some of my family are Texans, but not even they can explain why so many down there are compelled to act out the stereotype).

The worriers might spend more time studying data than talking. We are in the global deflation event of all time, inflation itself rolling over again into the danger zone.

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