Professor Reich,

As regards the world bailing us out, I wouldn't hold your breath. I'd expect you'd agree that export growth is best attributable to the robust world economic growth we have witnessed in the past few years. Less well understood, or at least articulated, is the extent to which that growth coincided with and was in fact catalyzed by rapid credit growth abroad, and especially in emerging economies. That emerging market and Asian credit explosion has been largely instigated by these nations unsterilized currency intervention in the face of eye-watering $800 billion US dollar current account deficits, (which can be verified simply by checking the astounding global official reserve growth, which actually understates said), with some help from the Japanese. The spigot for all of that is US demand growth, and now that it is shutting down, so will global economic growth give way to contraction. Sure enough, we are already seeing this in the data, and in our export data. Brad Setser has demonstrated recently that real US export growth has stagnated over the past few months. Of course, that data is too short to represent a robust trend, but given the framework I've just alluded to- which is far more supported than anything any of the Pollyanna's in the 'decoupling camp have proffered- I wouldn't go betting life savings that export growth will pick up.

And therein lies the rub- the export growth, the current account deficit, Asian mercantilism, the Greenspan put, refusing to 'target asset prices' until they go down, blithe laissez faire attitudes toward an industry that has demonstrated itself to be reckless again and again, stimulus packages during recessions and 'returning surpluses to the taxpayers' during booms- all of these things are linked, all have conspired to this moment, and all can on some level be shown to be a manifestation of our own character flaws as a nation. The product of all of that is a malevolent financial system that has metastasized and now envelops and dooms the real economy (something Herbert Hoover wrote about ruefully from the rear view mirror).

Sadly, the men and women that could've help to avert this circumstance instead, Sal Bellow like (great intelligence to the cause of ignorance when the need is great), created story lines like, 'new economy' and 'financial innovation'. Meanwhile, it was far from difficult to see that something was amiss. Mortgage debt doubling in the 6 years to 2005, credit default swaps going from non-existent to $45 trillion in notional exposure- hence, weapons of financial mass destruction- broker dealer balance sheets and securitized lending exploding, AAA rated loss chasing schemes (CPDOs), asset prices of all types globally bubbling, inflation breaking out in dollarized countries- all of these things were flashing warning signs that only the most neglectful stewards could've missed.

But miss they did. And now we have a problem. The GSE's and banks are highly dependent on the credit insurance companies, and who knows how dependent on CDS exposure. These insurers and CDS counterparties, (often times unregulated leveraged to the hilt hedge funds), are shockingly thinly capitalized, as are our banks bleeding from losses in no position to bail them out, as are the ultimate in systemic doom- those GSE's and their multiple trillion dollar balance sheets. The taxpayer is wealthy, but not that wealthy. In this case, the FHA won't be able to bail us out the way they have Countrywide. When the entire financial system is too big to fail, it has failed. And all the Fed has left is the world's heretofore and rapidly shrinking faith in the US dollar.

In any case, it is far from clear whether these danger signs were actually missed. There will be plenty of time for recriminations, including those applicable to the culpable figures of the 80s and 90s. In the meantime, the mayhem is only beginning.

And to a Clinton victory! Don't leave off the implied Joan.

As for how good this is for Obama and the party, well, I couldn't disagree more. But no matter what you think of that, I think it speaks volumes that the Clintons defend their tactics by, in essence, saying, "well, the Republicans do this". The parallels to when the Abu Grahib came to light with Republicans assuring us, "Well, this is nothing compared to what Al Qaeda is doing". I guess we're just getting innocent Iraqis toughened up and better prepared to take up the jihad.

The Clintons moral compass is irreperably broken. Justifying their tactics by pointing to behavior we condemn in others is tantamount to endorsing it. We should bear in mind the circumstances of the country we would run. As the man for all seasons says, "it does not profit a man to sell his soul for the whole world, but for Whales?"

...and twice on Sundays.

Krugman, a man who clearly believes himself to be 'the' official word on liberal orthodoxy, goes after Obama on vapor. This health care mandates issue is a mirage. What it comes down to is whether it makes sense to issue a penalty before or after a person gets sick. Hillary and Edwards say before (mandate), Obama says after (penalty). Who is right? Well, whomever it is, Krugman has not wasted one pixel- nor likely one thought- on arguing his case. Instead he pans Obama's very serious plan by constructing woeful strawmen.

Interesting though- Frank Rich writes a scathing and brilliant editorial on the Clintons and the NYT deems it necessary to post it next to a link for reader comments, while never reciprocating for Krugman's incessant inane rants. Ah, the webs we weave...

I make car parts for the American Working Man, because that's who I am, and that's who I care about.