This will be a long and fairly involved article.  However, there is a lot of ground to cover.  So, let's start with the charts of the market.

Let me begin with this caveat: I'm a capitalist.  I like making money.  I don't see anything inherently wrong in the pursuit of profit.  However, I do see something wrong with what has happened underneath the surface of the economy over the last 7-10 years.  There has been a wave of corruption largely related to the mortgage market.  Whether it's brokers who fail to disclose terms and conditions to borrowers, banks who fail to actually check credit, ratings agencies who do a poor job of analyzing collateral, fund mangers who do little to no due diligence, or regulators who have (at best) fallen asleep on the job it seems as though everyone dropped the ball this time around.

Last week the stock market took a big hit, largely as a result of continued problems in the financial sector.  The short version of what is happening is not good: banks of all sizes are taking big hits to their capital which will restrain their ability to make loans for the foreseeable future.  That, in turn, will add to an already slow economic environment.

I originally wrote this at the end of 2006, largely because of the need to find a way out of mammoth amount of debt in the US economy.  This article and the ideas presented are salient to the recent push to drill in Alaska and offshore.  While I have heard a great deal of rhetoric from both candidates, little of it makes economic sense.  McCain wants to institute another round of supply-side policies despite the fact that the previous two times these ideas were implemented the US increased its overall debt at a mammoth level (see charts below).  While I agree with Obama's overall concept he faces a different problem: he  inherits a federal government that is deeply in debt.  I explained his basic problem here.  The problem with both candidates is no one is accepting the fact the US is in a dire situation at the federal level.  Dire situations call for radical solutions.

The Federal Reserve released the Beige Book last week.  This is a great source of economic information.  It is essentially a collection of anecdotal information from the Federal Reserve's contacts in each Federal Reserve district.  As such it provides valuable insight into what is actually happening on the ground.  Here is a link to the complete report.  I'm going to break this down into smaller pieces of information and provide some charts to flesh out what the report says.  All the charts are from econoday unless noted otherwise.

Over the last few weeks, we've seen an important development from various central banks: they have issued statements they are concerned about inflation's latest uptick.

There's been a tremendous amount of debate regarding the overall condition of the economy.  First, there is a great deal of hair-splitting between analysts with some arguing we're technically not in a recession (because we haven't seen two consecutive quarters of negative growth) while others are arguing all the other indicators used by the NBER to date recessions are pretty much there.  Whatever your argument, there is little doubt the econoy is hurting.  The question now becomes, when will it get better?  Given the overall reasons below, I don't think it's going to be anytime this year.

So -- what's behind oil's latest price spike?  And the general price spike that's been happening for the last year and a half?  There are a ton of contributing reasons, but one stands out as the biggie.

The "script" that follows assumes the highly unlikely (actually downright improbable) that Bonddad becomes the Treasury secretary in the new administration.  The script makes no points regarding who will win, because frankly it doesn’t matter.  The next president – whoever that is – faces a daunting federal fiscal environment.

I have been quiet on the presidential campaign.  I'm not much of a political writer in the first place and am firmly of the opinion that you should only write to your strengths.  However, Obama's appearance on Fox news was a tactical mistake of massive proportions.  In addition, it legitimized the greatest threat to our country -- fact free debate.  As such, Obama has lost my vote.

Housing is what started the current mess me are in.  Thanks to record low interest rates from the Federal Reserve, the US consumer went on a debt-induced home buying binge.  That binge is now coming home to roost.  And it's not going to let up for the foreseeable future.

Once again, we're hearing economic la-la land from the Republican candidate.  As usual, we're hearing the great canard -- there is a free lunch, you can have something for nothing and you can cut taxes and increase revenue.  Let's go over the facts AGAIN for those of you playing at home.

The whole dust-up about Obama's statement about people being bitter is, well, overdone.  People have every right to be bitter right now.    Consider the following facts.

I have been against the Iraq war from the very beginning.  However, my arguments didn't rest on the lofty perches of ethics or morals; they rested on the far cruder cost benefit analysis of war.  The bottom line is war costs far more than it is worth economically.  And the longer this war progresses, the more expensive it gets.

From the WSJ:

After several years of relative stability, a wave of rising prices is washing over the world economy.

It comes at a most inconvenient time. The Federal Reserve is sharply cutting U.S interest rates -- the opposite of the usual response to rising inflation -- to prevent the housing bust and credit crisis from causing a deep, prolonged recession. That's making the global response to inflation more complicated.

OK -- I'm not sure that's what actually happened, but there are some strong coincidences in this story line that make me raise an eyebrow.  More below the fold

Either we're in a recession or we're about to start one.  Either way, the latest expansion is over.  While there may be some question about when it happened (the expansion, that is) the reality is it was the least impressive expansion since WWII.  Below I will explain why.

Yesterday, Bernanke testified on capital hill.  His testimony, which is available on the Federal Reserve's website, offers a good overview of how the Fed views the economy.