“Housing, Inflation both getting worse,” says a headline at MarketWatch.

The price of oil held steady yesterday – in the face of Saudi plans to pump another 200,000 barrels a day. The dollar held steady too. And the yield on the 10-year note rose to 4.24%. Gold jumped $13.

Unless you own an oil well or a goldmine, it has been a bad year. Out of the world’s 52 leading stock markets, 49 are down for the year. Ireland, for example, has lost 15% of its equity market value. Vietnam has been crushed...everyday is a down day in Hanoi.

In the United States, the fall in stocks has cost investors almost a trillion this year. Losses from housing are said to be about a third of that. But that is just the beginning. From 2006, the value of U.S. housing stock is said to be down about 16%. Case/Shiller, the experts on housing trends, think another 15% will be lost before the housing market bottoms out in 2010. That will mean a further $3 trillion haircut for U.S. households.

You’ll remember – how could you forget? – that the U.S. government’s ‘financing gap’ is about $57 trillion....and that the federal government’s official ‘national debt’ alone is increasing at the rate of $1.5 billion per day. Well, in today’s news comes word that the “combined net worth” of all U.S. households is $56 trillion. Already, you see, the country is technically broke – with more in liabilities than in assets. But the asset side of the ledger doesn’t include the value of government property – such as the White House or the Pentagon – which could be sold off to an Arab sovereign wealth funds in an emergency.

An emergency is probably coming, so the feds might want to get some appraisals.

But it is housing we are writing about today, not the approaching bankruptcy of the United States of America. As to the roof over their heads, Americans probably have no illusions. But as to the other roof – or the extra roof – they bought in order to benefit from the greatest boom in housing prices in 100 years, we feel a revelation is coming. A profound insight is approaching them, like a tiger through the bushes...ready to rip them to pieces.

That insight hit us hard over the weekend. We pass it along today, in the language of an enlightened economist, so that our dear readers won’t be caught off guard. In two words: houses suck.

What makes houses such a terrible thing to own is what investors refer to as “negative carry.” When housing prices are rising, you scarcely notice the ‘carry.’ Your capital gains offset them. But when housing prices go down, you take not only the capital loss...but you begin to notice the carrying costs too. You can own a stock without having to pay property taxes on it. In fact, you should have “positive carry” on it – assuming the stock is the sort that pays dividends. There are banking stocks, for example, paying 5%, 6%...8% dividends. In other words, they pay you to own the stock. Same thing with bonds – positive carry. You collect your coupons...and hope yields go down so you’ll make a capital gain on the bond itself. Businesses, partnerships, commercial property – all produce (or should produce) positive carry. Even a dog can produce a kind of positive carry...you have to feed him, but at least he licks your hand. And a wife...well, never mind....

But a house? Even it could produce positive carry if you bought it cheaply enough and it is rented out to good tenants. Otherwise, your carry will go negative...and negative in a major way. We’ll tell you about one of the most negative carries in the history of housing...below.

Before we get there...let us notice that, predictably, homeowners are eager to push some of the cost of negative carry on to someone else. In England, one of the largest mortgage lenders has been nationalized. In America, private mortgage lenders are laying low...government backed mortgage lenders are taking their place. Government sponsored companies originated 81% of mortgage loans in the last quarter of ’07 – more than double what they had done at the height of the housing boom. And Federal Home Loan Banks own nearly $1 trillion of mortgage loans.

The socialization of the mortgage business may be a vote-getting idea in any housing downturn; in an election year it is unstoppable. In effect, while China raises it banking reserve requirements to fight inflation...and stocks its central bank coffers with dollars, pounds and euros...America lards its own reserves with mortgages, and encourages its member banks to lend more freely.

And so, in the Land of the Free, people look to the government not only for drugs and retirement benefits, but also for food (a record number of Americans are now getting food stamps) and for housing. Without the government behind the mortgage industry – without the Fed, Fannie, Freddie, the FHA and the FHLB, and the mortgage tax credit – they would have to pay full price for the roofs over their heads...

No one wants to do that...and no candidate proposes that they should have to.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.