Inflation - the next whammee to the slowing economy arrives

The New York Times reports on the rapid increase in inflation during June.

A crucial measure of inflation rose at its fastest rate in 17 years, the government said on Wednesday, just a day after the chairman of the Federal Reserve warned that inflation poses a significant risk to the nation’s economic outlook.

The Consumer Price Index, which measures prices of a batch of common household products, rose 1.1 percent in June, the Labor Department said. That means inflation accelerated at nearly twice the rate in May, when the index grew 0.6 percent.

It was the biggest monthly gain in the closely watched inflation indicator since September 2005.

The increase in June caps a year where inflation has risen to proportions seen by some as threatening the stability of the American economy. In the last 12 months, the price index has risen 5 percent, the biggest year-over-year jump since 1991. Core inflation is up 2.4 percent compared to June 2007. [Snip]

A large part of the increase in the index stemmed from the record high price of crude oil, which has sharply raised gasoline prices. Stripping out food and energy products, the so-called core index rose 0.3 percent last month, slightly more than economists had predicted. Energy prices advanced 6.6 percent, reflecting the surge in gasoline prices.

The Fed has warned about higher inflation for months, although Ben S. Bernanke, the Fed chairman, has repeatedly said the nation does not face the runaway price gains of the 1970s.

But this week’s economic reports speak to the difficult situation faced by policy makers going forward. A measure of retail sales, released on Tuesday, showed that consumer spending has nearly stagnated, a sign that economic growth is slowing. But the Fed cannot lower interest rates without risking more inflation problems ahead.
[Highlighting mine - Editor WTF-o]

So inflation is hitting while the economy is slowing. The fed cannot pump the economy by lowering interest rates without increasing inflation and also causing the dollar to drop more in international markets.

The drop in the dollar has caused some of the run up in crude oil prices, but not by any means all of it. Here is today's report from Kevin Drum.

This week, in a piece called — you guessed it — "Crude Awakening," Business Week claims to have gotten access to a super-secret internal Saudi document with a field-by-field breakdown of estimated Saudi oil production from 2009 through 2013. Its conclusion? 15 million barrels is a pipe dream:

The detailed document, obtained from a person with access to Saudi oil officials, suggests that Saudi Aramco will be limited to sustained production of just 12 million barrels a day in 2010, and will be able to maintain that volume only for short, temporary periods such as emergencies. Then it will scale back to a sustainable production level of about 10.4 million barrels a day, according to the data.

....One dramatic part of the data concerns a site called Ghawar, which has been the kingdom's workhorse field for decades. It shows the field producing 5.4 million barrels a day next year, but the volume then falling off rapidly, to 4.475 million daily barrels in 2013.

The Fed's only cure for inflation is higher interest rates that result in slowing the economy. If Saudi Arabia can no longer act as the swing producer that sets the price for OPEC (which is what the limitation on their production means, then oil prices will continue to rise, with a resulting further wave of inflation through the American economy - and probably the economies of the rest of the industrialized world.

This isn't going to help the already weak banks that Jim Cramer considers threatened:

We all know that Citigroup (NYSE: C) (Cramer's Take), Wachovia (NYSE: WB) (Cramer's Take), Washington Mutual (NYSE: WM) (Cramer's Take) and National City (NYSE: NCC) (Cramer's Take) are in trouble. Bank of America (NYSE: BAC) (Cramer's Take) says it isn't in trouble, but obviously the market doesn't believe management because the stock failed to rally when it said its dividend was safe.

Further bank failures are going to further stress the already stressed American economy.

The next time someone claims all this will be over by 2009, laugh at them.

As for who caused all this - the housing bubble and the credit crunch are all entirely financial mismanagement brought on by deregulation of the financial sector of the economy as a result of the Reagan Revolution and the conservative movement with its strong Libertarian free market element that catered to Wall Street Bankers. That's caused most of the drop in the value of the dollar. It was entirely the fault of conservative policies since Reagan was elected in 1980.

But the rapid increase in price of oil is different. It is the natural effect of running out of a key economic resource. Still, it was known and predictable, even if the exact numbers were not known for sure. Yet in spite of that foreknowledge, no one has prepared for it by encouraging greater efficiency in oil use. The conservatives have fought increasing the CAFE standards tooth and nail for two decades. They have also fought government economic planning, claiming that it meant the government would be choosing economic winners and losers, and that twas a function that should be left to the free market. Unfortunately for that idea, the free market is congenitally incapable of looking past the next quarterly earnings report.

Planning for the far future requires collecting information from a lot of different and widely separated sources and analyzing that data without being too concerned with the results of the cost of data collection on the next quarterly report. Only a monopoly or government can do that, and monopolies charge monopoly-level prices to do it. Government is more efficient at system-wide regulation and long-term planning than private enterprise.

Ignoring the strengths of government is a major reason why the current economic problems are now worse than they should have been.

Protect the rich and make them richer; Repub solution to the credit crisis and economic problems

Now that we know that the Bush administration is going to bail out Fanny Mae and Freddy Mac, something that as late as last Friday they were saying they would not do, let's look at how they are going about it. Dean Baker has a lot to say:

Bush and Congress Want to Raise Your Taxes to Help out Fannie and Freddie's Management and Shareholders
By Dean Baker - July 13, 2008, 11:27PM

That's the word from the press reports. Apparently the government is going to hand Fannie and Freddie bucket loads of taxpayer dollars, no questions asked. The NYT reports that they will be given access to $300 billion of government loans at below market interest. [Snip]

Some people say that we had to hand tens of billions of dollars to the country's richest people to prevent a financial collapse. This is simply not true.

We had to keep Fannie and Freddie in business, but we could have done this by putting conditions on the bailout. The government uses conditions all the time when it offers help to low and moderate income people. Unemployment insurance, TANF, food stamps, and even student loans come with all sorts of conditions.

It is only when it comes to giving money to extremely rich people that we find it impossible to impose conditions. Again, we could have told Fannie and Freddie that no executives will get more than $2 million a year in total compensation. We could have told their shareholders that they are out of luck, because that is what is supposed to happen when you invest in a bankrupt company.

Instead, we told the people who work as truck drivers, school teachers, and fire fighters that they will have to pay more in taxes to help some of the richest people in the country escape the consequences of their own stupidity. While kicking the poor is always fun for politicians, neither the Bush administration nor Congress are prepared to tell the very rich that they are on their own.

Congress and the administration have no interest in protecting the people who are losing their homes to foreclosure, often because they were put into mortgages they could not pay. This had the effect of forcing real estate prices up while allowing mortgage brokers and lenders to reap huge commissions before the mortgages were sold to investors as parts of collateralized debt obligations or similar arcane and not understood financial instruments.

The result was Alan Greenspan's housing bubble and a lot of very wealthy mortgage brokers knocking down commissions of as much as a million dollars a year, all at the cost of a lot of people spending a lot of money on homes that would inevitably be in foreclosure as soon as the bubble broke and investors who found that the "secure" investments they were sold a AAA instruments suddenly were worth much less than they paid for them.

IndyMac Bancorp, which failed and was taken over by the federal government last Friday existed to accept deposits from people who wanted to save their money and to make loans to people who wanted to buy homes. According to Mish's Global Economic Trend Analysis:

The Pasadena, California-based bank specialized in so-called Alt-A mortgages, which didn't require borrowers to provide documentation on their incomes. Its home state has been among the hardest hit by foreclosures.

"Given their focus on Alt-A and a heavy concentration in California, they would have suffered meaningful losses in almost any scenario...

Alt-A loans are often called "Liar Loans.")

IndyMac's big profits came from making more loans, so they did the logical thing - they stopped verifying income. Whatever the customer said his income was they accepted without question.

Of course, the mortgage broker trying to get the loan accepted by IndyMac Bankcorp would not get a commission unless the loan was accepted, and they got a bigger commission if the loan was bigger, so the mortgage brokers encouraged the home buyers to inflate their income. This was almost required in area where home prices were highly inflated, but when the loan was accepted, it added to the inflation of home prices. That was a major contributor to the housing bubble.

IndyMac is often described as a bank closely associated with CountryWide Mortgage Company, previously the nation's largest mortgage broker. So CountryWide was making the mortgage loans and making its money from the commissions, while IndyMac was lending the money that was used to buy the homes, and taking its commissions. IndyMac was then bundling the mortgages into CDO's and selling them to investors.

The investors, like Freddy Mac and Fannie Mae, would buy the CDO's, which would give IndyMac more money to loan. The investors would look at the CDO's and see investments that were backed by mortgages. Homeowners generally pay their mortgage first before they pay other bills, and if they stop paying, the home can be sold in foreclosure to recover the investment.

As long as home prices were rising, this seemed like a safe investment, so the bond rating agencies would quickly stamp them AAA quality, which meant that more investors could bid to buy them. (Many large investors are limited to buying only certified very safe investments by the people who give them money to invest.) We now know that the bond rating agencies were competing with each other by promising security sellers (like IndyMac) higher ratings as long as they got the job of issuing the rating. Since the bond rating agencies did not get paid unless they got the rating job, they were bidding the ratings up higher.

All of this was exaggerated by the Ayn Rand acolyte and Libertarian Alan Greemspan's Federal Reserve. He lowered interest rates to pump more money into the economy and avoid Recession prior to Bush's reelection in 2004, and then encouraged the use of exotic mortgages like Adjustable Rate Mortgages (ARM) so that more people could qualify for home mortgages. In addition, he refused to use the power the Federal Reserve has to set lending standards for lenders or to require mortgage brokers to provide comprehensible information to the borrowers on the risks to the loans they were issuing.

Finally, there was no regulator that any of the participants had to provide honest information about their loans or their own financial stability to. Investment banks (like Bear Stearns) have never been regulated and Congress, led by the Austro-Libertarian Senator Phil Gramm, repealed the Glass Steagall Act, removing most regulation from banks like IndyMac.

It is now clear in hindsight that this (lack of) system could not survive long. The question was not if it would collapse, but when.

So why did the credit crisis occur when it did? The answer is "Alan Greenspan." As noted in my previous post Politics of the federal Fund Rate, Greenspan lowered the interest rate to keep the economy out of recession prior to the 2004 Presidential election. The rate reached 1.75$, a rate so low that there was literally no incentive to save or invest in fixed rate securities. A major reason why large investors were investing in Collateralized Debt Obligations was that bank savings rates and federal bonds were so low that after inflation there was no effective return, and the rating agencies were saying that the higher paying CDO's were safe (see the rating agency discussion above.)

Even Alan Greenspan knew that the interest rate he had established was too low, so starting in November 2004 (immediately after it would effect the Presidential election) he started raising the interest rate 1/4% per month. This went on until the Summer of 2006. The first publicly announced warning of the impending mortgage market collapse was when CountryWide Mortgage Company warned in early 2007 that foreclosures were sharply increased. The rest has been a long, slow collapse of the credit markets, now to be followed by the collapse of more banks. Here's Jim Cramer:

We all know that Citigroup (NYSE: C) (Cramer's Take), Wachovia (NYSE: WB) (Cramer's Take), Washington Mutual (NYSE: WM) (Cramer's Take) and National City (NYSE: NCC) (Cramer's Take) are in trouble. Bank of America (NYSE: BAC) (Cramer's Take) says it isn't in trouble, but obviously the market doesn't believe management because the stock failed to rally when it said its dividend was safe.

The current economic problems are going to continue until the inflated prices of homes bought during the housing bubble are cleaned out of the system, and as they do get cleaned out, the banks that have those old over-priced mortgages on their books as assets are going to be losing money. That's what just killed IndyMac, and It's what the Federal Reserve is trying to head off by lending money to Freddy Mac and Fanny Mae. The fear is that as the losses mount, the investors/lenders/Depositors may decided that they have to remove their money first, because those who wait will find no money there to pay them. The race to be first to try to get your money back is called a run on the bank. The fed is promising that they will pump in taxpayer money to Freddy and Fannie to prevent that.

The financial managers who have been running this mess have the knowledge to recognize the ponzi scheme that our American investment and commercial banks had become, but they were staying in long enough to get their millions and move them to safer investments. They've lobbied Congress and the administration to head off the regulation that would have stopped their personal wealth-generating activities before they got out. Now the fed is bailing them out using taxpayer money, while letting the individuals who bought homes take the hit.

Note also that nothing in the bail-out adds any regulation to the system, so that the same thing is going to happen again as soon as this economic collapse finishes. And they guys who caused it have their wealth in safe places so that they can wait out the economic time of troubles and start a new boom as soon as it's over.

This is the logical working out of the Reagan Revolution and the conservative movement with its free market banking policies. It will always work this way, every time you allow bankers to operate without regulation and close, effective oversight.

The Democratic leadership has failed America.

If you want to know how the Democatic leadership (Steny Hoyer, Nancy Pelosi, Harry Reid and Jay Rockefeller) has failed American, go look at this cartoon.

For the details, go read Glenn Greenwald. But only if you have a strong stomach.

Why is this the case? I agree with Glenn when he says

...the Democratic Party as a whole (with many individual exceptions) supports those policies and/or believes in nothing other than the perpetuation of their own power, which they perceive is advanced by supporting those policies.

This has got to change, and strongly so.

Obama vs Hillary; the primary in perspective - by Sara

The futurist, Sara, provides some very interesting commentary over at Orcinus on the long Democratic primary. Why did Hillary come so far and then finally come up short to Obama? Sara offers four interesting comments. This is a very brief summary of Sara's lengthier and better stated comments, followed by observations of my own.

I. Hillary is the last of a cohort of pioneer women feminists all born in the period between 1945 - 1955. They broke the trail and did a lot of heavy lifting, but they were not fated to reap the final results of a lot of the work they did. There's a lot left to do.

II. The Blacks-vs-women narrative of the primary was a false one from the get-go.

III. While women all Spring have been saying "It's our turn," that flies in the face of the American history of improving conditions for Blacks and women.

For 150 years, women's rights advances have pretty reliably followed African-American rights gains by about 10-15 years -- and were almost always precipitated by them. The original suffragist movement was a direct outgrowth of the abolitionist movement; and most of its early founders were members of both. The feminist revolution of the 1970s likewise grew directly out of the civil rights struggles of the late 1950s and early 60s.

I had vaguely noticed this historical trend myself, but Sara spells it out clearly. Her historical statements are spot-on.

IV.

The real conflict that defined the choice between Hillary and Obama wasn't about melanin content or X chromosome status. It was about a generational hand-off of power -- a demographic shift that Obama saw coming, and Hillary did not.

This trend was pretty clear to anyone who read the voting results and the polls by the time the SuperTuesday in February was over. The Boomers are in shock and denial. For the first time since they started voting in mass in 1968, they have had control of the results of an election taken away from them. And as a pre-boomer born early in WW II myself, all I can say is "Thank God! Finally!"

Sara refers to what looks like a very interesting book Millennial Makeover. The blurb points out "...the so-called millennial generation (dating from 1982) is the largest in American history, boomers included, and that roughly 40 percent of it is African-American, Latino, Asian or racially mixed. One in five Millennials has an immigrant parent. It’s this generation that is fueling the excitement and some of the record turnout of the Democratic primary campaign, and not just for Mr. Obama." The Boomers have been the pig in the python for four decades, and now they are beginning to fade fast into history. The Millennials are ready to replace them.

It is this new generation and their attitudes that is bringing out the conservative anti-immigration attitudes. The older White and mostly male individuals (like Lou Dobbs) find the attitudes and ethnically and racially mixed make up of the Millennials to be quite frightening. They feel that they are losing control that they thought they had over American society and don't know where it is going. The conservative reactions to the Civil Rights Movement and to feminism has a similar cause - fear of loss of control.

America's biggest problem has not been sexism. It has been slavery and the resulting racism. That's not to say that sexism has not been a major problem, only that racism has been much, much worse; and correcting slavery and the resulting racism has always been the first priority. But the corrections for racism have exposed the similar problems faced by women and gays (and all LGBTs.) The corrections for racism have also built the tools and organization techniques that other minorities needed to get their problems addressed.

The Democratic primary this year has been an interesting set of events that "played-out" the on-going relationships between racism and sexism, against a background of the generation shift as the Boomers begin to lose their dominance over our American society.

Of course, that's not all. In the political arena there is also now a reaction against the conservative overreach as the conservatives have tried under Bush/Cheney to remake American society in their preferred conservative small-government, low tax, non-regulatory federal government yet militarily monarchist image. This form of conservatism strongly resembles that of the pro-slavery plantation-owner elites in the South in the run up to the American Civil War.

The large plantation slave-owners prior to the Civil War made up most of the wealthiest men in America, based on their control of exported cotton. Cotton was the most significant raw material in international trade during the four decades before the U.S. Civil war, which made cotton then comparable to oil today.[*] Slavery allowed those plantation owners to sell cotton at a lower price than anyone else in the world, since they had total control over their labor supply. That's what made Southern cotton so extremely profitable. Slavery was the basis of the wealth of the planter class, much as oil and similar international trade today is the basis of the extremely wealthy conservatives. Wealthy families fight hard to protect their wealth and the status that it gives them, and their wealth gives them a lot of tools others don't have with which to conduct the battle. That's a key to understanding conservatism.

Even that's not all. Stack on the challenges of Peak Oil and Global Warming, as well as the continued population growth and urbanization of American society as well as the relative decline of America's economic and military power globally. It's going to be an interesting 21st century, in the same meaning as the old curse usually said to be Chinese"May you live in interesting times."

Go read Sara's discussion of the Hillary - Obama confrontation for a more in-depth presentation. Read Howe's book for a fascinating discussion of how America was formed in the first half of the 19th century. Much of the conflict there continues to today.

---

[*] See "What hath God Wrought: The transformation of America, 1815 - 1848" by Daniel Walker Howe. (2007) (in the series The Oxford History of the United States.)

He has a very interesting chapter entitled "The World that Cotton Made."

A REAL economist trashes Phil Gramm's dissertation.

John McCain depended on Phil Gramm as his main economics adviser until Gramm demonstrated his inability to be sent out to represent the campaign politically. When Gramm left The Texas A&M University Economics Department it was widely known on campus that the entire department was delighted at his departure because he was not a research economist. So how bad an economist is Phil Gramm?

This was written by James K. Galbraith, an economist at the University of Texas and published on the net at Think Progress - the Wonk Room.

The public record is clear, and I summarized it a few months ago for The Washington Post: “Phil Gramm’s career was the most aggressive advocate of every predatory and rapacious element that the financial sector has. He’s a sorcerer’s apprentice of instability and disaster in the financial system.” (It is worth noting that when the Post asked Gramm about this, he denied it.)

Back in 1995, when Phil Gramm was politically invincible in Texas, various so-called friends suggested that I should be the sacrificial lamb to run against him. I ducked, as any sensible person would have. But (at their request) I did supply the Dallas Morning News with a referee report on Gramm’s dissertation, along with a few notes on that of his wife. Needless to say, hers was much better.

To inject a note of academic sobriety into this election campaign, my review follows.

To: Susan F—

From: James Galbraith

Subject: Phil Gramm & Wendy Gramm Dissertations

Date: June 8, 1995

Thank you for sending the Gramm dissertations. I have read them through with considerable interest.

Phil’s is a curious document. It is mainly an exercise in the history of economic thought, though I doubt that Gramm thought of it in those terms at the time. His topic is an issue in the theory of consumer demand, namely, what is the precise meaning of the idea that consumers have well-formed and unchanging preferences? His method is essentially, a critical review of literature.

For a Ph.D. dissertation, especially one which is not mathematical (and it isn’t), this one at 79 pages is short. It contains no advanced mathematics, no data or analysis of data, no archival or otherwise original research. It is based solely on published sources available in any well-equipped library at the time, and there is only one reference to anything written after 1960, which for a thesis submitted in 1967 is astonishing. The writing style is for the most part graceless and involute, marred here and there by misused words like “fecundities.” It is belabored and repetitive, with chapters that overlap each other. It is basically an extended discussion of a single idea.

Gramm’s basic point is that “the constant utility demand schedule is the only theoretically valid formulation of the demand schedule…” (p. 29). This is not without some interest. The point is quite subversive of modern empirical microeconomics, particularly in view of this statement, which is also possibly the only vivid metaphor in the thesis:

“Movement off the utility level from which the utility surface was projected in a dynamic context, with the specification of a time period of adjustment, alters the form of the utility surface and it flaps like a sheet blowing in the wind.” (p. 30)

What this means in English is that you can’t draw welfare conclusions (that is, inferences about whether people are better or worse off) from an empirical analysis of their changing choices under changing economic conditions (changing prices or technologies) — which is a lot of what applied microeconomics tries to do. The structure of preferences in the course of changes is unlikely to remain stable, Gramm argues, and therefore data cannot be interpreted along the lines that traditional theory requires.

It is probably not useful to speculate on what this dissertation means for Gramm’s later political views. His references are weighted toward Chicago and the conservative economists he is identified with.

However Alfred Marshall, author of the first modern principles text and a distantly historical figure even thirty years ago, seems to be the economist with the strongest influence over him.

Perhaps more significant is the skeptical attitude toward data and evidence. If you take Gramm’s methodological position, you are left with a real quandary as regards research: other than introspection, pure math and literary criticism, what is an economist to do? This may account in part for Gramm’s migration out of academic economics and into politics, where an unapologetic life can be built around simple verities. But then again that may be giving the man too much credit.

On the whole, Phil Gramm’s thesis could have been condensed to an interesting article at some point in the development of twentieth century microeconomic theory. My guess is that the proper moment for that article would have come in the late 1940s, or some twenty years before Gramm actually wrote his dissertation. By the time he did write it, the mathematical character of the field had long since outpaced the very modest display of technique here, and the concerns Gramm writes about would probably have already been considered antique in most quarters. It would be interesting to know if Gramm got anything published out of this, and if so, where.

In other words, Gramms Ph.D. dissertation is short and presents no new information, contains no economic data and without data cannot be considered economic analysis. The references are primarily ancient conservative Chicago School material.

Essentially there is no indication that Phil Gramm is really an economist if his dissertation is the measure. At best his economic philosophy is considered Austro - Libertarian, but without adding anything useful to even that impoverished school.

I find it unsurprising that he has no body of published research and that he is not held in any particularly favorable esteem by real economists.

Gramm is the guy John McCain chose as his primary economics adviser before Gramm opened his mouth in public and embarrassed the McCain campaign so badly that they fired him. He had been considered very likely to become Secretary of the Treasury.

That doesn't reflect well on McCain's judgment, either.

Now we have proof. McCain is a 19th century candidate for the 21st century Presidency.

McCain admits it. He doesn't know how to use the world wide web. From Think Progress:

John McCain has acknowledged that he is “an illiterate” when it comes to computers." [Snip]

In an interview with New York Times, John McCain confirmed that he doesn’t email, doesn’t read blogs, doesn’t go online, but does occasionally read Drudge. While he’s not a consumer of online information, McCain said he does “understand the impact of blogs on American politics today and political campaigns”

Talk about someone living in a bubble! He doesn't know anything his aides don't tell him. That explains why he keeps Phil Gramm around. McCain simply doesn't know any better and has no way of learning how to deal with reality.

Consider - do you really think someone that unadaptable can deal with the modern Presidency any better than the totally failed Bush has?

I don't think so. It isn't his age. I'm only six years younger than McCain, and I keep learning. The finest modern education tool is the world wide web. If you don't use it, you don't understand it and you don't understand the world it describes and influences. McCain is simply lost in the modern world.

McCain can't be trusted as President any more that Bush should have been.

What is the nature of time in historical and legal research?

Time. We all live through it, but do we understand it? Is there a difference in the nature of time in historical research and physics research? Mary L. Dudziak presents some interesting insights into the nature of time. Here is an example:

In the scholarship on law and war, time is seen as episodic. It is sometimes seen as linear and progressive, but the most common feature is that time is episodic. There are two different kinds of time: wartime and peacetime. Historical progression consists of moving from one kind of time to another. Law is thought to vary depending on what time it is. The relationship between citizen and state, the scope of rights, the extent of government power are thought to depend on whether it is wartime or peacetime.

A central metaphor is the swinging pendulum – swinging from strong protection of rights and weaker government power to weaker protection of rights and stronger government power. Moving from one time zone to the next is thought to cause the pendulum to begin swinging in a new direction. [Snip]

"Like everyone else," she writes, "historians assume that time exists, yet despite its obvious importance to historical writing – what is history but the account of how things change over time? – writers of history do not often inquire into the meaning of time itself." One of the difficulties in talking about time is that the words we use to describe it seem to presuppose an understanding of time. Hunt continues: "Time feels like an essential and defining feature of human life, yet when pressed to define it, we inevitably fall back upon duration, change, and ultimately, the tenses of our languages, past, present, and future."

Time has been central to other fields, especially physics, philosophy, and anthropology. Within fields, ideas about time have been highly contested. "Temporality enters our conceptual framework both as a descriptive component of our immediate experience and as a component of our theoretical description of the world," writes Lawrence Sklar.

Most of us simply believe that time just "IS" and that we understand it. But that assumption simply isn't true. Time is as much a linguistic phenomenon as it is a physical one, as is demonstrated above in its conception as "the tenses of our languages, past, present, and future."

Then you have to look at time in the manner it is applied in the different disciplines such as history and physics. In history time is seen as episodic, but in physics it is considered to be a constant and measurable dimension. Those views of time clearly conflict. Most of us are not even aware of the conflict, let alone which of the views we subscribe to.

Why do those views differ? It's because time performs different functions in the theories of history and of physics. So how is that possible?

It's because we are human beings. We don't ever know everything. We can't - as was described by Herbert A Simon in his theory of Bounded Rationality. We adopt the theory of time that makes the theories we are working in work.

The different views of time are each appropriate to the purposes to which we wish to achieve. The result is that physicists use a view of time as being constant and measurable, while historians and legal scholars use a view of time as being episodic. Very rarely do the two views contradict each other, unless the members on one discipline attempt to apply the theory appropriate to the other.

Since different views of time are rarely stated explicitly, the likelihood of confusion is high. This is especially true when politicians apply an inappropriate view by ignoring the experience of experts in the field without any understanding of what they are doing. Or more maliciously, that kind of confusion makes political propaganda quite easy to sell.

Consider how the Bush administration insists that we are at war with some strange amorphic enemy they call Terrorism - another effort is to create some enemy they call Islamo-fascism. It is blatantly an effort to change the nature of law and the relationship of the Presidency to the Federal Government. That propaganda fiction is what is behind the idea of the so-called Unitary Presidency.

By making the explicit nature of time and its application to theory, along with an understanding of the different possible views of time and when each is appropriate, the propaganda fiction the Bush administration is attempting become clear. There has not been a real shift to a state of war. War requires an existential threat to the nation, one that the various forms of banditry that the conservatives, Neocons and Bushies try to lean on to justify their actions simply don't achieve. That is the real fiction that is being created to justify the criminal actions of the current administration.

Ms. Dudziak's post presents an interesting analytical tool to those of us mere humans who attempt to deal with reality in spite of bounded rationality.

The government is saving the mortgage industry by nationalizing the loses and handing the later profits to the bankers

Daniel Gross at Newsweek has now published a mainstream article that tells much of the unspoken the truth about the mortgage mess. He points out that the continued announcements over the last nine months that the latest gimmick to save the mortgage industry had solved the problem, only to be followed by new and larger problems, has made it very difficult to get investors to step in and refinance Freddy Mac and Sallie Mae.

The result is that the only remaining solution is for the government to take over those two agencies. Since Freddy Mac and Sallie Mae have been responsible for 70 of all mortgages sold in 2008, that means that the mortgage industry has already been nationalized. It belongs to the government. The only question is how explicit the ownership documentation actually is.

That means that the conservatives in government are directly responsible for subsidizing the losses while giving away all the profits in the mortgage industry since Alan Greenspan created the housing bubble by lowering interest rates to avoid a recession that would defeat Bush in 2004. [See Economics and politics of the Fed fund rate.]

The unregulated free market dreamed of by conservatives and pushed for by the Reagan Revolution has failed disastrously. The result is going to be more government subsidy, handing out taxpayer funds. The only question is whether the conservatives will obstruct efforts by the government to recover gains to pay the taxpayers back instead of just handing future profits to the bankers who created this mess.

Oh, wait. I forgot. Phil Gramm has told us all the Truth (as viewed by conservatives and Libertarians.) This is "this is a mental recession. .... We have sort of become a nation of whiners." Right. Phil Gramm and John McCain have theirs already in hand and to Hell with the rest of us.

Go read the Newsweek article. Then prepare for the lengthy period of stagflation that has already started.

IndyMac bank fails Friday evening. Biggest bank failure in 24 years

Notwithstanding the happy talk by government economists and bank regulators as well as by Wall Street financial experts who want to sell us all financial products, the New York Times is reporting July 12 that IndyMac Bancorp failed Friday night and was taken over by the regulators. IndyMac Bancorp used to be part of CountryWide Mortgage Corporation, the largest America mortgage company which was recently taken over by Bank of America when CountryWide became effectively insolvent.

As of last March, IndyMac held $32 billion in assets, most of which were deposits guaranteed by the Federal Deposit Insurance Corporation. The FDIC now owns the bank and will operate it until is can be sold. When it is sold, the American taxpayers will make up the losses that remain. This failure is a direct result of the refusal of the bank regulators to properly regulate the risks that were taken at the demand of conservatives in the regulating agencies when IndyMac loaned money in recent years.

This Major bank failure is on top of the talk earlier Friday of a possible government takeover of Fannie Mae and Freddie Mac by the U.S. government that threatens to stick the American taxpayers with an additional $5 trillion of questionable dept. The credit crisis that the financial pundits have been claiming would be over by the end of 2008 is getting worse.

Since the current national public debt is roughly $9.5 trillion dollars (over half added by Bush 43) which is a major reason for the collapse of the international value of the dollar. The collapse of the dollar has been the major reason why the price of oil is rising to previously unimaginable levels. When the U.S. public debt increases by over 50%, the dollar is going to collapse. That means even worse than it already has this year and last. Three dollars for a Euro, anyone? $300 per barrel of oil?

As the dollar tanks, the inflation is going to skyrocket. And more banks are going to fail.

The Reagan Revolution/conservative movement has done its work. It has destroyed America's middle class and most of America's wealth and power. Only the superwealthy will escape unscathed, as they always do. The only question remaining is how bad it will get and how soon we understand it.

The tough times for America are ahead but getting here quickly. Count on it. It is too late to stop the disaster. Just remember. The conservatives/Republicans have created it. And the federal judiciary they have packed with members of the Federalist Society will be sure to keep the idiocy in place for the next generation. And on top of all that, they destroyed Iraq and handed it to Iran while ignoring effort that might control al Qaeda.

Is there anything the conservatives/Republicans represented by the Republican Congress and Bush 43 - America's worst ever - possibly the most stupid, even insane ever American occupant of the Presidency - have not screwed up royally? Certainly nothing that compares with the disaster they have left behind them. The next decade will be spent learning everything they have done to America, and the next two generations or more will be spent repairing the damage.

I have returned! Somewhat.

Sorry about the time off. I've missed writing my opinion here, but I took a course on data structures that turned out to be data structures along with an introduction to programming languages Visual Basic, C++, and C# as implemented in Microsoft's Visual studio 2008. All in six weeks. Tough but fascinating.

Unfortunately, it was time consuming, and blogging is addictive, so I had to avoid the blog. I'm not totally back, either. But here are some interesting political stories.

Want to know what happened when the Medicare bill passed the Senate the other day? Kevin Drum summarizes Krugman. There may be some hope for the Democratic Congressional leadership yet, the FISA cave-in and abandonment of the Rule of Law notwithstanding.

While you look at Kevin Drum, also look at the way Dick Cheney has buried the EPA report on Global Warming. His intent is to kick the can down the road and make the Democratic President release the bad news. It won't come out of the Bush administration because Cheney doesn't want the public to get the best current scientific consensus regarding how bad things really are. It's simply not politically favorable to the republicans and their oil company patrons.

The big news from the McCain camp is that McCain's co-chair and economics advisor told the Washington Post Editorial Board (Gramm was speaking for McCain, mind you) that regarding the concerns of the public about the current Recession Marie Antonnette had it right. "Let them eat cake."

Well, actually Gramm said "You've heard of mental depression; this is a mental recession. .... We have sort of become a nation of whiners." Same thing, really. Just a different translation from the (conservative and elitist) French Monarchists.

People in the McCain camp with less of a tin ear quickly got the candidate to disavow Gramm's statement. McCain stated that when Phil Gramm was speaking for McCain to the Wall Street Journal Editorial Board for McCain, he wasn't REALLY speaking for McCain.



Obama quickly added his view of the issue:



This follows the similar goof by McCain when he stated that America's most successful social program, Social Security, "...is a disgrace."



The only disgrace is that Wall Street bankers can't get their hands on the commissions they want from those large sums of money that are passing through the Social Security system. And somehow, the Social Security system works and works very well as it is structured, without the involvement of (expensive) Wall Street Bankers. Those "lost" commissions actually go to the retirees instead of making the Wall Street Bankers richer.

But back to the economy - the collapse of the mortgage market has gotten worse. Atrios reported yesterday that Fannie Mae and Freddie Mac, the two super large purchasers of mortgages, may shortly become insolvent. They either own or have guaranteed $5 trillion in mortgage debt. That is the poster child for "too big to fail." The Federal Reserve Chief, Ben Bernanke is considering taking them over - which means that the American taxpayer will cover their losses. If so, it will make the Savings and Loan Crisis look very small in comparison.

The Republican view is that such really large financial organizations should be bailed out if they become insolvent, but that the homeowners who are being foreclosed should not get any similar bail out. Yet bailing out the homeowners would prevent or alleviate the problems effecting the large banks.

according to National Public Radio this morning shares of Fannie Mae and Freddie Mac have dropped by half, indicating what the owners and buyers of those shares consider to be the most likely outcome of their problems will be. Phil Gramm and John McCain are wrong. The economic problems are not just "...a mental recession." They are instead the direct result of three decades of deregulation of the banking and financial sector forced through by the believers in the so-called "Free Market." An unregulated financial market always leads to a series of booms and busts, each larger than the one before. This was learned clearly by Franklin Roosevelt and was the reason for the Glass-Steagall Act which Phil Gramm ram-rodded the repeal of in the late 90's.

McCain has at least two real problems in his campaign for President. First is his ideological blindness resulting from his belief in so-called Free Markets. Second, as demonstrated by the McCain campaign messages on Social Security and on the economy is the lack of coordinated management in his campaign headquarters. The ideological blindness is not something that someone running for President as a Republican conservative can do anything about. The thing to watch is the campaign management as demonstrated by the lack of message discipline.

The two messages on Social Security and on the economy clearly demonstrate just how poorly managed the McCain campaign really is. I wrote about this problem earlier.

The McCain campaign knows it, which was what the earlier announcement that Steve Schmidt will take over the day-to-day operations of John McCain's presidential campaign from current campaign manager Rick Davis. Steve Schmidt is reportedly a message management expert. His skills will be sorely tested by the McCain campaign because of the very nature of his candidate and McCain's relationship with the Press.

The poor management of the campaign is a clear reflection of the man at the top, John McCain himself. It was similar poor campaign management that almost drove an essentially broke McCain out of the Republican primary in the Summer of 2007, and the poor management continues. McCain simply is not an effective top manager.

McCain has never personally managed any organization larger than his own Senate office. His largest naval management effort was a year running a squadron on an aircraft carrier, where overall management was handled by the Captain of the carrier. McCain was not in overall command there. Nor has McCain ever held strategic command anywhere before this run for the Presidency. If his efforts at managing his campaign are any indicator, both Obama and Hillary are much better managers than McCain is.

Still, I doubt that the McCain campaign will continue to make two or three gaffs a week as it is currently doing. They will learn as they go along - if they can overcome McCain's ego.

There's a lot more worth discussing, but I still have computer classes that need my focus. This just what I see that really needs to be written about.

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Addendum July 12, 2008 at 9:31 AM CDT

The New York Times presents an interesting article on what the reported concern about Fanny Mae and Freddie Mac means to the general public at the moment. It may be serious, and it may just be more happy talk by the bankers to try to calm the publics fears so that they won't stop buying homes right now. It won't be clear which it is until next week at the earliest.

Yesterday's Washington Post story may be more realistic.

We're nearing that delicate point in the cycle when even the usual cheerleaders have hung up their pompoms, consumer and business confidence has disappeared and investors are driven mostly by fear rather than greed.

What started out as a credit crisis and then morphed into a broader financial crisis has finally worked its way into the real economy. That economic downturn -- a recession, inevitably -- is beginning to wash back on the already weakened financial sector, creating the kind of self-reinforcing vicious cycle that is difficult to control.

This is the way a market economy corrects for its excesses -- in this case, an excess of cheap debt that had the effect of inflating the demand for goods and services and the value of stocks, bonds, real estate and commodities. Now that that cheap credit has disappeared, the value of most of those assets has fallen while some of that demand for goods and services has begun to disappear.

As part of that "de-leveraging" process, households and some businesses are being forced to reduce their indebtedness, either by paying it down or admitting that they can't. But it is in the financial sector, where debt was piled on debt in ever-more complex arrangements, that things have begun to get real dicey. Prices for many credit instruments have collapsed, forcing banks and investment houses to take billions of dollars of real or paper losses. Meanwhile, creating new credit has been dramatically curtailed.

Then we get today's offering from the Wall Street Journal about what the collapse of IndyMac Bankcorp means.

IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators, in the third-largest bank failure in U.S. history.

IndyMac is the biggest mortgage lender to go under since a fall in housing prices and surge in defaults began rippling through the economy last year -- and it likely won't be the last. Banking regulators are bracing for a slew of failures over the next year as analysts say housing prices have yet to bottom out.

The collapse is expected to cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion, potentially wiping out more than 10% of the FDIC's $53 billion deposit-insurance fund.

The Pasadena, Calif., thrift was one of the largest savings and loans in the country, with about $32 billion in assets. It now joins an infamous list of collapsed banks, topped by Continental Illinois National Bank & Trust Co., which failed in 1984 with $40 billion of assets. The second-largest failure was American Savings & Loan Association of Stockton, Calif., in 1988.

Many want to blame the collapse of IndyMac on a letter written by Sen. Chuck Schumer pointing out the weaknesses of the bank. Sen. Schumer responds that the bank was in trouble because of its shoddy loan practices, not because he wrote a letter. Sen. Schumer is right. The bankers just want to blame someone outside of banking for the really rotten loans the bankers themselves have been making for the last seven or more years.

IndyMac had been troubled for months, and investors were concerned about its possible downfall well before Sen. Schumer's comments. It specialized in Alt-A loans, a type of mortgage that can often be offered to borrowers who don't fully document their incomes or assets. The company sold most of the loans it originated, but continued to hold some on its books. As defaults piled up, IndyMac's finances deteriorated.

The bank will be run by the FDIC and reopen Monday. The FDIC typically insures up to $100,000 per depositor. IndyMac had roughly $19 billion of deposits. Nearly $1 billion of those deposits were uninsured, affecting about 10,000 people, the FDIC said.

It's not like IndyMac wasn't part of the CountryWide Mortgage Company which made more bad loans than any other mortgage company in the U.S.

Much of the blame lies on the Libertarian Republican Alan Greenspan for refusing to regulate the banks during his long tenure as Federal Reserve Chief.

Why are conservatives in disarray?

Rick Perlstein addresses the problem. There is no question. Conservatives in 2008 are in severe disarray. Why?

A very short summary of Rick Perlstein's article is that they are in disarray because for the first time since the Goldwater movement, conservatives were given the total reins of control of Congress, the Presidency (Bush) and the Supreme Court -- and they have totally failed in their efforts to implement conservatism in government. Their efforts have been a completel disaster. Now they are looking for someone to blame, and they are doing whatever they can to avoid looking into mirrors.

Let me excerpt some of Rick's article:

1) There has been, by conservatives own self-definition, a "modern conservative movement" at least since the Goldwater campaign of 1964. Ever since, they been explicit and sedulous about their goal: first control the Republican Party, then control the government. In 2001, with Republican control of the presidency, congress, and the federal courts--and conservative control of the Republican Party--for the first time since the inauguration of the movement, for the first time, and on their own terms, conservatives had a chance to govern. They governed, too, with exceptional popular wind in their sails (at least since 9/11/01), and with the benefit of an extraordinary infrastructure that let them staff the federal government from top to bottom with personnel steeped in the ideas and habits of an extraordinarily self-conscious "conservative movement." This single blunt fact cannot be overstated: here was the first chance in the modern era conservatives have had to prove themselves. And they failed. [Snip]

2) Consider P.J. O'Rourke's famous joke: "conservatives say government doesn't work, and then they get elected to prove it." Conservatives make much of their movement's plurality, their intellectual divisions. But all the while they united around Ronald Reagan's nostrum from his 1981 inaugural address, "government isn't the solution to our problems, government is the problem." The point is obvious, and frequently stated: people who despise government have trouble governing. But when you look at the question of disarray, the question goes deeper. How to reform "conservatism"? Certain "reformers"--Douthait and Salam, Brooks--say, Stop despising government. But if that's the reform, again, disarray, mutual recrimination, confusion, anger, are only to be expected: it forces an identity crisis. You can't simply turn on a dime against something that was supposed to be a core principle and not suffer wounds. [Snip}

3) A culture of bad faith and cheap grace. I presume you saw my review of Edwards' book:

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/01/AR200805...

Note how Edwards seems to have comforted himself all these years with a "fact" that is simply untrue: that the line-item veto--and, by implication, the imperial presidency itself--was something liberal Democrats, not conservatives, supported. Nearly every conservative has some version of this--some way of saying that if self-identified conservatives fail or fall short, it's because they're not "really" conservative. But the standards of what is a "conservative" are subjective, shifting, self-contradictory, and always self-serving. A conservative will always give himself the out of saying "conservatism has never been tried." The culture feeds off its own refusals of personal intellectual responsibility.

There is no doubt that Bush has had complete control of all three branches of the federal government working for him. There is no doubt at all that Bush has failed. The excuse that conservatism has not been tried doesn't wash. If under the most favorable circumstances ever conservatism was placed in control and then "was never tried" then what circumstances are possible in which it would be tried?

Conservatism has failed totally, and it has failed because - in the most favorable circumstances possible - it simply could not deal with the reality that government has to handle.

These guys - conservatives - are true believers. They are in disarray because their ideology - to which they have devoted much of their lives - simply has not been up to the task it faced. True-believer Communists faced the same crisis of Faith when the Soviet Union collapsed after Gorbachev tried to correct its numerous and by then obvious flaws. The true-believer conservatives, like the true-believer Communists before them, cannot deal with the failure of the ideology to which they have decidated so much time, treasure and effort.

So now they are resorting to rewriting history and lying, both to each other and to the rest of us. The true-believer conservatives simply are not going to accept the absolute failure of their ideology. But no one else is going to trust them to run government again as long as the events of the last seven plus years remain in living memory.

That's why conservatives are in such disarray. They and their ideology has been seen publicly to have totally failed its major test. All they have left now is lies and fantasies. A new generation is already rejecting them. And they can see it coming. They just don't want to look.

Is the mcCain campaign being managed adequately?

Politico has an article reporting from people concerned that the McCain campaign is wasting ti8me and not well-organized. Here's a little of it:

McCain game plan worries insiders
By: David Paul Kuhn
July 1, 2008 07:34 PM EST

Four months have passed since John McCain effectively captured the party nomination, and the insiders are getting restless. Top GOP officials, frustrated by what they view as inconsistent messaging, sluggish fundraising and an organization that is too slow to take shape, are growing increasingly uneasy about the direction of the McCain presidential campaign. [Snip]

“It’s not just message or not having just one single meta-theme to compete with Obama,” said a veteran Republican strategist with close ties to McCain’s top advisers. “It’s not just fundraising, which is mediocre. And it’s not even just organization, which is [just] starting or nonexistent in many states.”

“McCain’s campaign seems not to have a game plan. I don’t see a consistent message,” said Ed Rollins, a veteran of Republican presidential campaigns. “As someone who has run campaigns, this campaign is not running smoothly. [Snip]

“Here is where the problem is: We had a nomination gap between when McCain was nominated and the Democratic race completed,” a swing state Republican Party chairman said. “I think [campaign manager] Rick Davis and his team did not have an understanding of how the grass-roots, organizational part of the party works. They did not use what the [Republican National Committee] had done, or how groups like the [National Rifle Association] could have helped the McCain campaign locally.

“They are just now opening up campaign operations in most states. The RNC was ready to go in most states in March,” the state chairman continued, listing off grievances ranging from the campaign's “dictating” the members of various RNC committees to the state party's having been “threatened” that, though McCain “couldn’t afford not to play in our state,” the campaign would not “recommend us for resources” if the state party did not abide by its requests.

One frequent criticism surrounds the widely held perception that the campaign has failed to define or convey a consistent narrative against Obama — something that many Republicans insist should have begun right after Obama captured the nomination.

It should be remembered that the McCain campaign has chronically been short of money, so they may be husbanding their funds for key critical locations.

But another point to remember is that John McCain has never had the responsibility for strategic management of a large organization. Arizona has only a little more than 6,000,000 population and the three major cities - Phoenix, Tuscon and Flagstaff, are not that complicated to campaign in statewide. He has never faced a tough race for Senate, and quickly lost the tough race for President to George W. Bush in 2000. His navy career never required strategic level management. Nor has his Senate career. This is a key limitation that Senators trying to run for President face.

Compare McCain to Obama. Obama appears to understand strategic management, and his loooong race against Hillary certainly gave him the experience and need to conduct strategic management. Obama has already run a campaign in all 50 states, and has organizations in all of them. That's strategic management.

McCain essentially let his opponents in the Republican primary self-destruct and then he took the mantle and ran with it. Only, according to his critics as reported by Politico, McCain has apparently sat on the mantel rather than running with it, while Obama and Clinton fought the lengthy and serious 50-state primary campaigns we have all watched - and which sucked the media air out of whatever McCain might have tried to do.

I strongly agree with General Wes Clark. McCain performed heroically when his plane was shot down and he was severely injured, followed by 5 and a half years as a North Vietnamese POW. But his heroism did NOT in any way give him experience or training as a strategic manager!

The criticisms by Republicans of his campaign this year to date seem to confirm McCain's lack of experience as a strategic manager, and more important, his apparent lack of understanding of Strategic Management.

That's not to say that he won't figure it out in the four months remaining until the election in November. But strategic management is an art that takes a while to learn. I damned sure wouldn't count on McCain getting the picture and applying it in the four months remaining until the election.

Compare this report of McCain's campaign management with Barack's Management Style.

Republicans working to divide the Democrats

Republicans work hard to divide the Democrats and damage the unity that should defeat the Republican candidates almost every time. It was Nixon's stock in trade, and it is being used today to exacerbate the differences between Hillary and Obama supporters.

Think not? Go read Rick Perlstein. Why would a Republican who has contributed only to McCain charter PUMA PAC, a so-called "grassroots" organization even now trying to win the Democratic nomination for Hillary Clinton rather than Barack Obama? Here's a second investigation of the false-flag PUMA's.

FOX "News" is, of course, pushing the false flag PUMA "movement" for all they're worth.



Darragh Murphy certainly looks like a typical plastic stepford wife Republican woman, doesn't she? It's been clear since last Fall that the candidate that the Republicans really did not want to face was Obama. They were all set to train their guns on Hillary, and Hillary has "baggage" they could easily target. Not only is Obama a more difficult target, he puts into play potential voters that Hillary can't get to come out to vote. Now all the Republicans have left to run with are McCain, a severely flawed candidate, Voter Suppression, and fomenting division in the Democratic Party.

This is another Republican "Rat-Fuck", which our illustrious media would have easily learned if they actually practiced journalism. This is how the Republican conservatives run elections to get elected so that they can steal from the taxpayers. (That's the subject of Thomas Frank's new book, "The Wrecking Crew", due out August 5, 2008.)

Institutionalizing conservative tyranny

Elections have consequences. We've been told that, but Isiah J. Poole has a graphic that makes it very, very clear what those consequences are. Go look at his article.

Here is his key point:

The conservative bloc on the [Supreme] court is a rogue band of ideological thugs who care less about strict constructionism and all of the other conservative legal buzzwords they use, but are all about furthering a conservative political agenda. [Snip]

The right understands the importance of a compliant judiciary in consolidating their political power, and they have made populating the judiciary with like-minded justices a cornerstone of their agenda. As a result, not only are conservatives on the precipice of having a decades-long hammerlock on the Supreme Court, but they have institutionalized a conservative tilt throughout the federal judiciary

The right-wing tilt of the Supreme Court is just the most obvious problem. Look at the graphic at the bottom of Poole's article. It shows the Reich-wing tilt of the entire federal judiciary.

These are lifetime appointments. It will take decades to bring back a judiciary that believes in the Rule of Law rather than the conservative ideology.

Here comes the inflation I have been predicting

Ian Welsh reports that Barclay's anticipates a sharp increase in inflation.

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."...

...Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of "anti-dollar" and as a market reproach to Washington's easy-money policies.

The Fed's stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2pc to 5pc over the last year.

Here's my "I told you so."

Last Fall I reported that the economy was going to be rocky in 2008. I said "I still suspect that the Federal Reserve Board under Bernanke is going to try to delay the recession, which will lead to greater inflation." I was right.

The Fed was going to have two choices. They could lower interest rates to pump up the economy, at the cost of stimulating inflation, or they could increase the interest rates to prevent inflation at the cost of letting the economy go into the tank.

They have chosen to lower interest rates for a short term pump of the economy, probably because this is an election year and one of the surest ways to replace the party holding the Presidency is to have the economy go into the tank during the election year. Greenspan ensured that the interest rate was high in 2000 when he wanted the Democratic President replaces by a Republican. Immediately after the election, he started lowering the interest rates to make Bush look good until by 2004. (See my earlier post Economics and politics of the Fed fund rate.)

Greenspan's Republican-appointed replacement, Ben Bernanke, appears to be playing the same game this year.

Here's the thing, though. The effect of pumping up the economy by lowering the interest rate is relatively fast. It's short term. But the effect of the lower interest rate to increase inflation works more slowly. It's long term. So Bernanke is making abet that he can keep the economy pumped up until after the election (meaning October) before his mismanagement puts it into the tank. From Barclay's:

Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.

What "the bond markets will take matters into their own hands" means is that interest rates will do what they did in the late 1970's. They will go sky high even without the fed causing it. More from Barclay's:

Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of "anti-dollar" and as a market reproach to Washington's easy-money policies.

The Fed's stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2pc to 5pc over the last year.

Mr Bond said the emerging world is now on the cusp of a serious crisis. "Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s," he said.

"They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box."

This means that the price of oil will continue to rise, one of many causes of American inflation, while the inflation will spread to the countries tied to the dollar around the world.

Bernanke's attempt to elect McCain and continue the Republican Party in the White House is going to severely damage both America and the world economy - even more than the current President and his party have already done.

The only question is whether Bernanke's bet that he can pump up the economy until the election will work. He is going to have to raise interest rates, and it looks like it will be before the election. That's lose-lose for the republicans, but the entire Republican economic small government - no regulation policy since 1980 has led to this.

But it's also lose - lose for both America and for the world economy. We have already lost. The only remaining question is how badly and how soon it will be so obvious that even those who don't want to believe is are forced to believe.

Don't believe me? Here's more from Barclay's:

David Woo, the bank's currency chief, said the Fed's policy of benign neglect towards the dollar had been stymied by oil, which is now eating deep into the country's standard of living. "The world has changed all of a sudden. The market is going to push the Fed into a tightening stance," he said.

# Gazprom chief expects 'radical' change in oil price
# More comment and analysis from The Telegraph

The bank said the full damage from the global banking crisis would take another year to unfold.

I haven't gotten this on my own. One of the key writers I have been reading is Ian Welsh. Here is his explanation of what is happening to oil prices.

I have been warning about inflation for some time, and predicting stagflation (high inflation, high unemployment). I have also noted that the problems were not going to be confined to the US and that the idea that other economies were "decoupling" was absurd.

Note also the mention of oil as an "anti-dollar". This is something Stirling, Oldman and myself were discussing as far back as 2004. Simply put, oil is the "unit of ultimate scarcity" in modern economies because it's very hard to substitute away from it. Sure, you can try, with foolishness like corn ethanol, but we're seeing where that leads. Oil makes the modern suburban economy possible. It is deeply embedded in how we make food, so much so that decades ago the late author Robert A. Heinlein came to the conclusion that the limits on food growth were based on oil, and that food wouldn't become a problem till oil became scarce. He's looking rather prescient today. The suburban economy of the US, likewise, simply requires oil to run. Suburbs and exurbs require automobiles and automobiles require oil.

At one time the dollar was backed by gold. What a lot of people failed to realize is that now the dollar has been backed by oil. Countries throughout the world wanted dollars, because dollars bought oil. As the dollar has been inflated by massive money printing, the price of oil has soared. This isn't the only cause of the increase in oil prices, but it is a significant reason. There is no reason for producers of a scarce, essential resource, to accept inflation unless you, well, have them over a barrel. For a long time the US did have them over a barrel—dollars, which were also the key currency for buying securities and various high tech devices, were more rare than oil was. Then Greenspan put the pedal to the metal. It is not a coincidence that oil prices begin to rise after Greenspan started providing huge liquidity hits in the late nineties.

What does it mean that "Greenspan put the pedal to the metal?" Look at the low interest rates again, designed to reelect Bush. Economics and politics of the Fed fund rate.

When you pay $5.00 plus per gallon for gas, consider it your contribution to the Bush reelection fund. As your food bill rises, that too is your contribution to the Bush reelection fund. As your rent goes up and you are unable to get a loan to buy a home, that is your contribution to the maintenance in power of the Republican Party conservatives. As your pay fails to keep up with the increased costs you face, that, too, is the direct result of the Bush Tax Cuts and their low interest rates designed to reelect Bush - and designed by Ben Bernanke to elect John McCain this year.

The American economy is no longer a free market if it ever was. This is today much the same battle as was fought from 1800 until the Civil War about creating a Bank of the United States that would give control of the economy to unregulated bankers. It is now a tool used by Republicans and their controlling bankers and big business CEO's to maintain and increase their political power. Their power and wealth matters. The way the rest of us live or don't live doesn't. If you are one of them, I pray for less power to you. For the rest of us, it's time to make that prayer come true.

Remember that this November, and be damned sure you vote. If you want to vote for the Democrat, make sure in advance of voting day that you are registered and have the required documentation to vote. Voters Registration are being denied as I write, and no notice is being provided to the registrant. You won't know until you try to vote and are turned away. Individuals are being required to present a picture ID issued by the government to vote, and in Arizona, you have to present proof of citizenship. These are Republican requirements that affect primarily Democratic voters.

So check now to be sure you are registered and have the required picture ID and proof of citizenship in order to vote. I'm an election judge, and if you don't have the legally required documentation I will turn you away. Your provisional vote will not be counted. Election day is too late.

When you do vote, if the Republicans let you, remember that the Republicans have put the economy into the tank so that whey will maintain power. They are incompetent at running the government, but they are very very good at stealing elections and corruptly stealing money from the government.

For some of my earlier posts on the economy click "economics" on the list of labels below.

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By the way, I have been focused above on the problems of the contradiction of keeping the economy running at a reasonable level vs. letting inflation run rampant. Ian Welsh's article makes really significant point on the threat of simultaneous inflation and deflation. The two economic events can occur simultaneously. Here's what he has to say about that possibility:

Finally there's this bit on the threat of deflation, which I think is worthy of commentary:

A small chorus of City bankers dissent from the view that inflation is the chief danger in the US and other rich OECD countries. The teams at Société Générale, Dresdner Kleinwort, and Banque AIG all warn that deflation may loom as housing markets crumble under record levels of household debt.

Bernard Connolly, global strategist at Banque AIG, said inflation targeting by central banks had become a "totemism that threatens to crush the world economy".

He said it would be madness to throw millions out of work by deflating part of the economy to offset a rise in imported fuel and food prices. Real wages are being squeezed by oil, come what may. It may be healthier for society to let it happen gently.

The threat of deflation has been looming for some time due to the housing crisis and how housing is tied to the money stock. It isn't actually a contradiction to be concerned with both inflation and deflation. What I've been expecting for a long time was first stagflation and then deflation (with an outside chance at hyperinflation, if the response by central banks is blown badly). Moreover, both can occur simultaneously, in a very nasty squeeze. There's no real contradiction in having food and fuel prices rise while prices for other items crash.

However notice the words "real wages are being squeezed by oil, come what may." Those words should send a chill of fear down your spine. Both because of their undeniable truth, and because of what they imply, which is that the world's elites intend for the peons to pay for this by having their real wages slashed in half. In fact, while it's inevitable there be some decline in real wages (I would guesstimate about 20%), there's a lot that could be done to mitigate such declines and to spread the pain around. But spreading the pain around means the rich would take an even bigger hit than they're going to take, and that's not acceptable. What will happen instead is that Bernanke and other central bankers will continue to provide huge sums of money in an attempt to bail the rich out of their losses and to avoid real, serious restructuring and regulation of the financial industry, despite the fact that the finance sector has a huge portion of the responsibility for this crisis, as it has for multiple bubbles over the last 30 years.

In the end though, what Barclays is saying is more interesting because Barclays is saying it than because it's great analysis. It isn't. It would have been good analysis a year ago. it would have been great analysis 3 years ago. There are bloggers who did most of this analysis 3 or even 4 years ago. Still, where the conventional wisdom is is important, because the conventional wisdom tells you what actions are now considered possible. And the debate right now doesn't include heavy re-regulation, or taking over banks, or even allowing banks to fail and go into government receivership. It doesn't include huge incentives for conservation of oil. It doesn't include the possibility of currency controls. What it comes down to is a simple debate between brute monetary policy approaches - easy money, or expensive money. High interest rates, or lower interest rates. Squeeze inflation out and suffer the consequences or don't squeeze it out and let inflation destroy real wages, wiping out all the gains of the post-war period.

Welcome to the world created by the rich when they think they can be rich while ordinary people become more poor. Welcome to the world that gets created when people think that they can have prosperity now and put the bill off till tomorrow.

As everything I have written earlier has pointed out, the wealthy and the bankers expect the rest of us to pick up the tab for their failures an losses while they get richer from taking risks that succeed.

Why not? With the conservative Republicans in power implementing the Reagan Revolution, the wealthy and the bankers are in the position to get rich from the upside risk and hand off the losses from the downturns to the rest of us. That's a great position for any financial person to be in.

But I'm sure that none of you mind making the Bush family, Dick Cheney, and the already wealthy bankers of J.P. Morgan, Citibank, and Bank of America more wealthy as the rest of us suck up the costs. Because that's the conservative way.

The housing crisis hits close to home

For the last five years my next door neighbor has been a very nice early middle-aged Black woman. She bought the three bedroom 50-year-old house next door after the previous owner died. She has been very good about keeping it nice and has grown really a really nice set of flowers and hedges out front. So it surprised me when suddenly there was a "For Sale by Owner" sign out front and then she got a bunch of people over and moved all her stuff out.

The "Owner" who put the signs up, it seems, was the investor who bought her home in foreclosure. I later learned that my neighbor had bought the house for about $60,000 (prices are low in Texas - that is a 1300 square foot house with front and back fenced yard.) Some rip-off artist put her in an adjustable rate mortgage. She had been paying $650 a month, and last Summer the rate reset. The new monthly payment was about $1050 a month.

She couldn't pay it, and the out-of-state mortgage holder simply would not work with her. That was silly because they had $58,000 in the mortgage and the house sold for $38,000. By not working with her, they walked away from a third of the value of the mortgage when Dallas-Fort Worth has been the second most stable metropolitan area in the U.S. after Charlotte, North Carolina.

Now the investor is getting worried. They buy foreclosed homes and flip them quick for a fast profit. Only they have had several very good potential buyers, and none of them can get a home loan.

Now I have an empty home next door, and my property resale value has dropped because of the value of the foreclosure next door. I'm still about 50% above what I paid in 1999, though - assuming that I could find a buyer. But there are two other homes in this same short block with For Sale signs and no occupants. I'm probably trapped here until the economy improves nationally.

The rogues gallery of my enemies includes George Bush, Alan Greenspan and his fellow Libertarian, Phil Gramm, and I have begun to understand why the Depression was simply another very predictable result of unregulated banking running the economy. Boom and bust; boom and bust; each time a bigger boom, each time a bigger bust. Economic stability is the direct result of effective bank regulation; Boom-and-bust is the direct result of unregulated banks.

With economic stability you get a thriving middle class, but the get-very-rick-quick boys are frustrated. Since Reagan was elected we have seen a rapid growth in the number of American billionaires together with a reduction is the percentage size of the middle class as big business and the banks shift the risk of loss to individuals and keep the profits to themselves.

Industrial nations build a stable economy and a strong hard-working middle class. America has been shifting towards the Latin American model of a small, very wealthy elite, an anemic middle class and a large number of very poor people. Why not? That's the Republican wet-dream. A few very wealthy people who own most of the country, a desperate and ununionized powerless work force, and a few favored proles who are allowed to pretend they are being paid what they are worth as long as they suck up to the wealthy owners and the bankers.

McCain is running on the Reagan Revolution and the Bush war. If he wins America is in deep shit.

Recipe for diplomatic success - 1. First remove Cheney from process

Digby nailed this story.

Not even Fourthbranch, the Barnacle himself, could outmaneuver the State Department on this one, and he's not happy:

WASHINGTON — Two days ago, during an off-the-record session with a group of foreign policy experts, Vice President Dick Cheney got a question he did not want to answer. “Mr. Vice President,” asked one of them, “I understand that on Wednesday or Thursday, we are going to de-list North Korea from the terrorism blacklist. Could you please set the context for this decision?”

Mr. Cheney froze, according to four participants at the Old Executive Office Building meeting. For more than 30 minutes he had been taking and answering questions, without missing a beat. But now, for several long seconds, he stared, unsmilingly, at his questioner, Steven Clemons of the New America Foundation, a public policy institution. Finally, he spoke:

“I’m not going to be the one to announce this decision,” the other participants recalled Mr. Cheney saying, pointing at himself. “You need to address your interest in this to the State Department.” He then declared that he was done taking questions, and left the room.

The Barnacle froze because it's one of the few things that could be considered a foreign policy triumph in the history of the Bush Administration, and it happened because mindless warhawks like him were finally sidelined. Bush's North Korea policy began with a series of mishaps and belligerence, just as the neocons wished, and it led to Kim Jong-Il getting the bomb. Precisely when the State Department started guiding the policy and Christopher Hill was given leeway to negotiate in the six-party talks, the situation changes, leading to today's destruction of their nuclear facility at Yongbon. The world is still a more dangerous place because of all of the delays, and the DPRK still has about a dozen poorly-designed nuclear weapons as a result.

"Cowboy" Cornyn rides again

Let's look at the advertisement that Texas Senator John Cornyn has put out.



Most Senators really shouldn't play dress up, but I have seen no indication that Cornyn has enough good sense to recognize that. Goldwater had the face, head and history to get away with it, as did St. Ronnie. Cornyn doesn't. And while I liked Johnny Cash music, Johnny Cash was from a very different era. But then, so is Cornyn.

Apparently Cornyn's opponent, Rick Noriega, found Cornyn's ad as silly and tasteless as I did. Here's Rick's response.



While Cornyn's ad is silly and tasteless, it is also very very representative of John Cornyn as a Senator and as a person. Could "Texans for John Cornyn" be an attack group attacking John Cornyn? If so, it really worked.

Oh. MY. God! Sen. Cornyn in a cowboy hat!

I really don't know which is sillier. This commercial or John Cornyn wearing a cowboy hat.



Keep always in mind that this is the kind of candidate that the Texas Republican Party has fielded since the conservative southern Baptists and the Evangelists took over the Texas Republican party a little over two decades ago.

American power, wealth was based on oil; That's nearly over

Sara Robinson is a futurist. She studies trends and estimates what they will mean in the future. Last week she reported on a fascinating book about energy as the source of empire. The book, by Thomas Homer-Dixon entitled The Upside of Down postulates that oil has been the source of American world power and the power of the dollar through the twentieth century, and that America's control of oil is running out. What does that mean? Here is an explanation from Sara Robinson:

All empires are built on vast amounts of energy. And no great empire in history has ever come to power without controlling and dominating the market in whatever the current preferred energy resource was at the time. [Snip]

He carefully builds the argument that Rome rose on its ability to harness vast amounts of Mediterranean sunshine, turn it into food, and then reliably move that food around the empire to feed vast numbers of soldiers, builders, and horses and thus consolidate its regime. When that system failed, the empire crumbled.

Likewise, the Dutch built their short-lived empire on the ability to supply oil for Europe's lanterns. They were supplanted by England, which was able to supply better, cheaper fuel out of its vast coal resources. British dominance lasted until a rising America turned out to have unimaginable amounts of coal, which allowed it to undercut the British pound as the world's most stable currency — and outperform the UK economically.

And then came oil, which was soon preferred to coal because it proved to be a far more efficient (hence, cleaner and cheaper) and versatile fuel. You could get far more energy output from a smaller unit (coal's comparative inefficiency made it impractical for small vehicles like cars, for example) and with far less effort; and you could turn it into far more different kinds of products -- not just fuel, but plastics, fertilizers, wonder drugs, and much more.

As the world moved toward oil at the beginning of the last century, the UK — eager not to lose out again — made an early bid for the oil fields of Arabia. But North America counted among its original blessings more oil reserves than any other continent on the planet; and that, argues Homer-Dixon, was decisive. Unable to compete, the British Empire faded, and the American Century began.

Sara then discusses how a second element of developing a full-blown Empire is developing and exporting the infrastructure that allows the rest of the world to build much better lives from that preferred energy source. America leveraged its control of oil resources by developing and exporting oil-fueled cars, power plants, farms and factories. Those exports became the basis of the dollar as the world currency. But that creates a dependence in the dominating nation on both control of the energy source and on world demand for the infrastructure that uses the energy source to create wealth. So Sara continues:

Homer-Dixon also points out another, more sober lesson. It's never happened that an empire that built its wealth on one energy resource also succeeded in dominating the next resource that supplanted it. Human nature being what it is, societies that are deeply invested in the current energy regime tend to fall into denial when that regime comes to its natural end — either because it simply runs out, or because it's superceded by something even more efficient and versatile. People can't believe things won't go on as they always have, or imagine that life could be any different. They shut their eyes to looming trouble, ignore the signs of impending doom, and refuse to make any reasonable plans to navigate the coming changes.

In the meantime, as old system falls apart, someone hungrier and more nimble finds a way to capitalize on a new, more efficient energy resource. And so old empires die, and new ones rise to take their places.

Put it in this perspective, and it becomes obvious that when we talk about running out of oil, we're not just talking about higher prices or low-carbon lifestyles or making an easy transition to something else that America (we like to think) will also dominate. When we fully grasp the foundational role oil played in securing America's wealth and global power, it becomes obvious that when we talk about moving off oil, we're really talking about nothing less than the demise of American power throughout the world, and the end of the American Way of Life as we've known it for generations.

That's serious stuff. But it's the truth that provides the backdrop for everything else that's going on right now. Against this larger process, it's easier to see that the dollar is weakening because our control over the whole oil economy that has supported its value for the past century is in serious trouble — and that we won't be out of financial danger until we can base on the dollar's value on something other than oil. Our political stature is tanking because the world doesn't need to kiss up to us anymore to keep the cars running and the lights on — and it won't rise again until we find something else of equally high value to offer. Our standard of living is falling because it always floated on a sea of oil — and that sea is drying up. Oil prices are high not because of market manipulations and oil company profit-taking (though plenty of oil economists are sure that's part of the story, too); they're high because the whole system is destabilizing, heading for a major tipping point.

The Sara continues by using this view of American world political power as being based on the American oil monopoly. As the oil and our monopoly of it runs out, so does American world political power.

Even before 9/11, the Bush Administration has always had a sense of panicked desperation about it — a desperation we've usually attributed to conservative revolutionary zeal, religious fanaticism, or free-market fundamentalism. But it's also plausible to interpret some of this as the desperation of people who were tasked with protecting the American empire by keeping the oil taps open and under control at any cost — and who know, deep in their guts, that time is running out.

The Project for a New American Century's stated strategy for maintaining the American superpower in the face of a rising China was to invade and dominate the Middle East, and thus control China's access to oil for the next several decades. That was the intended long-term payoff of the Iraq War: control the oil, and thus control the world. In their minds, if we have to bankrupt the country, tear up the Constitution, and piss off every other country in the world along the way, it's worth it — since they know we're not worth a damn economically or politically without the oil anyway. Sure, the means are ugly; but according to their view of the ends, there's simply no alternative — and no other possible future worth discussing. They don't care if we hate them now, because they're convinced we'll thank them in 20 years for having the statesmanlike foresight to do what had to be done.

(Blame it on too much time in the oil patch. That toxic elixer of crude and money so easily goes to one's head....)

This perspective also provides some extra context for why locally-based power generation, like on-site or community wind and solar, are political non-starters for energy execs and their government minions. It's obvious that they hate it because they can't take profit from it; but they also know that America's global hegemony depends on keeping the world dependent on energy supplies they control. Since nobody can capture a monopoly on the wind or the sun, there's no way to build the next global empire on them. And therefore, renewables simply aren't very interesting to people whose first priority is geopolitical dominance and stratospheric profit.

This view of energy and Empire certainly offers a coherent explanation of the twentieth century American world power. It also provides a connection between the period of American Empire, its decline, and the almost panicky reaction of American conservatives to that decline and to the loss of control of world oil.

One thing is very clear, though. Oil as we have known it is gone. Does that mean that American wealth and power is also gone? Remember, no previous empire every outlasted the loss of its control of the dominant energy source. Can America be different? Back to Sara:

From this 10,000-foot view, it's easy to interpret the political spats and economic machinations and deal-making and climate debates and regional wars — the whole parade that dominates the news now — as simply opening acts in a long transition that could end up taking most of this century. Unless a) we discover vast new reserves on a globe that's been already explored from pole to pole (unlikely) and b) we come up with dramatic new evidence proving conclusively that climate change isn't a problem after all (even less likely), then the hard fact is: We will be spending the next several decades moving off oil.

It's going to be the most important work of this century. And Americans can either get out in front of this change and come out of it at the century's end with much of their greatness intact — or continue to fight it, and end up as another of history's has-beens.

Meeting this challenge means we're going to have to get very smart, very fast, about a lot of things.

• First, we need to accept that this change is happening, and start having serious conversations about how we're going to handle it. The Bush Administration's denial has already cost us eight valuable years. It's an understatement to say that the longer we avoid the issue, the worse the transition will be.

• Second, we need to stay mindful of the horrific pitfalls. The unimaginable grimness of the worst-case scenarios alone should be enough motivation to get and keep us talking.

Even the most-likely-case scenarios are disturbingly short on sunshine and roses. Historically, energy transitions (involving, as they do, the collapse of vast economic and political systems) have never happened smoothly. Rome fell so hard that it took a thousand years for anything like it to rise again. The stable world order held together by the British coal empire shattered apart in two vast world wars and another dozen colonial revolutions (some of which still aren't resolved decades later). It's not unreasonable to expect similar disruptions as the American oil empire begins to unravel. It's not going to be pretty.

When complex economic systems fail, they almost always fail catastrophically, leaving vast numbers of displaced, disoriented and righteously angry people in their wake. Bad economic and environmental decisions get made. Critical issues are ignored, or abandoned due to lack of resources. If folks get desperate enough for security, it's entirely likely that they'll reorganize into feudal kingdoms or even warlord-run clans, as has already happened in too many Middle Eastern countries in the wake of war. Restoring these lost democracies can take generations. Much of that risk can be averted — but only if we're aware of the potential for trouble, and start figuring out how to deal with it now.

• Third, an important part of that planning will involve taking stock of the carbon-based resources remaining to us, and figure out how to best invest them to smooth the way to the next era. We can use that remaining margin of oil to rebuild walkable cities, construct next-generation energy infrastructure, and install electric transit. We can leverage it to repave the world with agrichar, restoring millions of acres of arable land, creating a vast new carbon sink, and eliminating the need for petroleum-based fertilizers in the bargain. We will still be able to afford to run oil-fueled bulldozers and trucks and ships for a while yet. Let's use them wisely while we can.

• Fourth, "globalization" may take on a whole new meaning, one that's more about global governance than global trade. Executing transition plans necessarily means empowering planet-wide organizations that have the ability to make and enforce the rules. We've already done this on a limited scale in the CFC treaties, international non-proliferation efforts, and so on. But navigating a transition of this magnitude is going to force us to take the whole idea of global government to the next level. (Can't you hear the far right howling about this already?)

Creating these new powers will raise all kinds of hard questions about national sovereignty and the rights of the global collective. In the end, we may revisit the meaning and purpose of government, and perhaps create entirely new forms of government that better balance local needs against global goals.

I've quoted more than enough of her article. She has an interesting final section entitled "What's Next?" which I suggest that you go read.