Recall that during the Great Depression, most people were not complaining that the necessities of life cost too little.  On the contrary, people were starving to death.

Yet, I believe it is universally accepted that the Great Depression was a deflationary event.

These two points highlight the fact that inflation and deflation refer to the amount of money in circulation, not to prices.

I suppose there are subtleties.  Devaluation comes to mind.  But I believe the principle is correct.

The magnitude of substandard mortgage debt today dwarfs, in constant terms, the magnitude of margin loans prior to the crash in 1929.

Where did that debt come from?  Craven, unscrupulous bankers trying to subvert their customers with unpayable loans?  Let's be serious.  The debt was the natural outgrowth of the Federal Reserve's policy of keeping interest rates artificially low to pay for the Iraq war.

With the appointment of Bernanke to the Federal Reserve, the Iraq war lost a key constituent.  With the election just past, it lost another.  It is still alive and still kicking, but in 2008 it will lose another.

The only problem is that the United States will have lost its way in the world by then.

"It's sort of hard to suddenly say everyone agrees Baker is the way to go when the leading Republican candidate for '08 is saying no," said William Kristol, editor of the Weekly Standard.

"It's preposterous, period," said Kenneth R. Weinstein, chief executive of the conservative-leaning Hudson Institute, about the proposal for a new dialogue with Iran and Syria. "Talking to them is not going to bring anything but a perception of American weakness."

"The report is a monumental disappointment, for all the hype," said Richard Perle, a former Reagan-administration defense official who strongly supported the Iraq invasion. "The recommendations are either wrong or of no consequence. There is no magic bullet, but in their desire to find something, they found the wrong things."

Michael Rubin, a former Pentagon aide who resigned in protest from an Iraq Study Group expert panel, said he believes Baker's assessment is unrealistic. He said that Syrian President Bashar al-Assad gains strength from positioning himself as a rejectionist and foe of the United States, so it is wrong to believe that Syria would think it would gain from an alliance with Washington.

"Sometimes realists have to deal with reality," said Rubin, now a scholar at the American Enterprise Institute. "Iran and Syria will press to exploit every advantage they have."

He said the report, as a strategy document, was a "Cliff Notes high school paper."

Eliot A. Cohen, a Johns Hopkins University professor of military strategy, said the Baker-Hamilton recommendations reflect "preoccupations that go back to when [Baker] was secretary of state and are completely detached from today's reality. The idea that Sunni are putting power drills in the heads of Shia and vice versa because of the Arab-Israeli conflict is bizarre."

They were the conservative leaders, quoted by the Washington Post, opposing the Iraq Study Group Report.

Welcome to the disgusting world of the Washington Post:

[note that the headline says "insurgents" and the text says "suspected insurgents"; and since when do Americans kill "suspects" anyway?]

U.S.-Led Forces Kill 20 Insurgents in Iraq

By Nancy Trejos
Washington Post Staff Writer
Friday, December 8, 2006; 6:18 PM

BAGHDAD, Dec. 8 -- U.S.-led coalition forces killed 20 suspected insurgents during a raid targeting al-Qaeda in Iraq fighters northwest of Baghdad on Friday morning, the U.S. military said. Two women were among the suspects killed, the military said.

Bush has created a situation where the only hope for the United States going forward is to remove our troops immediately, but, by doing so, he hands a huge section of Iraq to Iran.  I think he appreciates the dilemma.  And I also think he realizes that there is no way out for him.  And that he has two more years in office.

And, please note, the "insurgents" are fighting the forces aligned with Iran.  The people we're fighting are the ones who don't want Iraq to be given to Iran.  Makes a lot of sense...just like everything else George Bush does.

Read this post on the Oil Drum:

http://www.theoildrum.com/story/2006/12/ 5/17243/2556#more

The slope of the curve is unsustainable.  When Americans realize that they cannot drive more and more every year, they are going to become very depressed.

Recall that someone has superimposed the graph of Prozac usage and asset prices in the United States.  It is the same graph.  Recall also that gasoline is an asset.

1929 is going to look like a Pre-School field trip.

James Baker has done it again.  The Iraq Study Group has been hijacked by Baker to win the Presidency for the Republican Party in 2008.  I give him credit.

The Republican Presidential candidate in 2008 is no longer saddled with George Bush's war.  That individual will only have to wrap himself in the Iraq Study Group's findings and recommendations to distance himself completely from the current President Bush.  

Think about it.  It doesn't matter in the least what is happening in Iraq in the summer of 2008.  The fig leaf is in place:

"I fully support the bi-partisan recommendations of the Iraq Study Group.  I will implement them to the best of my ability."

See if both candidates are not saying that in the summer of 2008.

There is a problem for the Republicans.  I would give the American economy about another six months before the wheels come off.  Baker still has time, however, to convert another study group into a Republican election vehicle after that happens.  I would not be surprised to find him, a former Secretary of the Treasury (who covered up the Savings and Loan scandal), at the helm once again in summer 2008.

Of course, that other member of the Undead Republican Club, Alan Greenspan, will also be available.  They can serve together.

It is time to ask, Who is James Webb?  The answer to that question can determine the future of the United States.

Background reading: George Will's astonishingly silly column about Webb entitled, "Already Too Busy for Civility" which begins with, perhaps, the greatest Freudian slip in the history of political discourse: "That was certainly swift."  Swift?  As in "swift" boating?  

Here's the URL: http://www.washingtonpost.com/wp-dyn/con tent/article/2006/11/29/AR2006112901267. html

Okay, let's determine the future of the United States.  Who is James Webb?

a) He beat a (the?) leading contender for the Republican Presidential nomination in his home state. Please pause and reflect about that statement.  Ask yourself, did Hilary Clinton beat a leading contender for the Republican Presidential nomination?  Did Barack Obama?  Did John Kerry?  Or ask yourself, did Al Gore carry Tennessee?

b) He is the father of a serviceman in Iraq.  How do you think the American people feel about parents of servicemen and women in Iraq?

c) He was awarded the Navy Cross, the Silver Star, two Bronze Stars, and two Purple Hearts in Vietnam.  Okay, I admit that the "swift boating" has already begun.  But ask yourself, Is this John Kerry?  Could John Kerry be elected in Virginia?

d) He's not afraid to tell off George Bush.  I suppose that's what enabled him to win the Navy Cross, the Silver Star, two Bronze Stars, and two Purple Hearts in Vietnam.  Reflect for a moment on the following choice: people who are willing to tell off George Bush and people who are not willing.  What our country desperately needs is a political class who are willing to tell off George Bush, a "Coalition of the Willing" that actually helps our country.

e) Compare James Webb with John McCain.  One of them is so terrified of George Bush that he'll hug him every chance he gets.  One of them wants to send more American young people to Iraq to be killed in the cross fire of a civil war created by George Bush.

Who should be the next President of the United States?  I, for one, would like to ask James Webb to take the job. Ned Lamont was asked to take the job by Progressives in search of change. Let's ask James Webb. He can win.