It was Talleyrand who coined that phrase, and now we are minting a fresh series based on it. While the moral cripples in Washington continue to shovel the future into the furnace of Iraq, the reality is that their days are numbered and the numbers are getting very small.

The inflation report today says what we should be already clear about, and that is that Benjamin Bernanke knows less about running a central bank than he does about being an academic ladder climber. This should not surprise anyone who is paying attention.

Let's take a look at the inflation report, and why it marks another milestone towards the end of this era.

Right now the problem that the Federal Reserve has is that inflation is choking off growth. This is the ultimate end of any expansion, when the Federal Reserve can no longer use monetary tools to promote growth, because the expansion of the money supply creates more inflation than stimulus. This is a nice way of saying that any money the Fed puts on the table, rent takes off the table. This simple insight is based on what is called in the common vernacular "the law of diminishing returns".

As more and more of a particular good or service is produced, there is a curve, first it gets less expensive as fixed costs are spread out over more and more final buyers, then it gets less expensive as it becomes worth while to engage in more research, and then less expensive still as the fixed costs drop. But then costs begin to rise as whatever is scarce in the production starts to eat away at profits. There are only so many people who can be pilots, only so many barrels of oil in the ground. At a certain point the costs of locating these scarce resources starts to increase. There is also a pair of effects. One is that either the market is a monopoly, or it is not. If it is a monopoly, then monopoly profit are taken, if it is not, then the costs of competition in the form of advertising and other activities that don't add value rises. One way or the other, when everyone needs something, everyone pays more.

Now, in our case the bottleneck resources are raw materials and revenue streams. These are in short supply, and there is a relationship between the two, since they compete for the same consumer dollar. The more you pay for gasoline, the less the consumer has for buying a new monthly service that charges a fixed fee. As the price of one rises, the budget for the other falls.

Early in the inflationary bubble, a recession is discretionary. The monetary and fiscal authorities can decide to end the economic cycle in return for the benefit of cutting inflation off a the knees, and undergoing a round of creative destruction that will reorganize the economy. However, as the cycle goes on, the recession becomes harder and harder to delay. A Democratic Pricing Theory matrix comes into play: when more people are paying the costs of inflation in terms of net political power, than are receiving the benefits of inflation, then the pressure to end the expansion begins to outweigh the pressure to keep it going. Basically, if more and more people are losing their shirt to inflation than fear losing their house to recession, the recession starts to gather a political constituency.

The present inflation report shows that the Fed can still generate growth, with a huge assist from massive deficit spending, but only at the cost of double digit inflation. Let's say that again: we have just had our second taste of double digit inflation, and we are going to be having our faces shoved in this hog trough. The Democratic representatives in Congress have not heeded sane and sound advice from either their financial or progressive wings. Both look antagonistic, but in fact are making the same point.

The financial wing has said repeatedly that present interest rate and spending policies are not sustainable. That which can't go on, won't.

The progressive wing has said repeatedly that inflationary pressures on the working class, and this includes the vast bulk of the middle class, are unsustainably high. That which can't go on, won't.

The policy prescriptions that came out of this simple dual message are rather simple: end the war, pass universal single payor health coverage. The first will remove massive inflationary pressures on the economy, the second will control one of the most rampant costs afflicting the vasy range of Americans and reducing productivity and misallocating investment. The two represent, together, a shifting of the national effort away from making holes in walls in Iraq with bullets, and towards increasing American productivity.

Instead the Democratic Party listened to its pork wing. The pork wing saw how the Republicans were borrowing and squandering, and wanted to get in on the action. Lead by Rahm Immanuel and Steny Hoyer, with a big assist from Harry Reid and Chuck Schumer, they bent the party on a self-destructive course of becoming That Other Republican Party. The Democratic Primary Electorate is also bent on this same self-destructive course, as it prepares to crown Her Royal Clintoness as its nominee, and condemn the Democratic Party to electing a President who has promised to do everything wrong: not fix the health care system, continue pouring blood and money down the hole of Iraq, and pump more pork spending into the economy. In this case, since Hillary is to be the nominee baring an act of God or a madman, I am hoping that she is lying from end to end and will break every single one of her Bush-lite promises.

In otherwords the difference between the Democratic Congress and basket of rats, is that the rats can be seen getting off of the sinking ship.

To understand why this economic expansion has never felt good, consider the inflation and inflation volatility. Inflation at the consumer level is best measured, of the various government numbers, by CPI-W. An imputed number would give different results, and I will talk about that later. The volatility can be best seen by comparing the annual year on year inflation with the annualized monthly inflation. For the econogeek impaired that means comparing the percentage increase over the 12 months with the what the rate of inflation would be in the current month if it were to last an entire year.

The graph shows the sweet spot of the Clinton recovery, a roughly two and one half year period of low inflation and low inflation volatility. It also shows that there has been no similar period in the Bush expansion, and this has meant that people and companies have been less able to take risks. The result is that technology and personal mobility have been lower, incentives to work have been lower, and there has been an attendant decrease in IPOs, stock market growth and other measures of capital expansion. The lack of a sweet spot has meant that those in a position to profit from existing arrangements have done so.

This graph shows clearly that the present expansion, even if it were to continue, would not produce the burst of robust wage growth which would allow Americans to put their financial houses in order, nor for the country as a whole to do so. Now is the worst time to be spending money: prices are high, and the time to recoup those prices is short.

The present continued inflation volatility, and increasing general level of prices, is an indicator of the extreme financial mismanagement of the economy by the Republicans, and a sign of how morally bankrupt, and simply economically blind, as well as politically inept, the present Democratic Congress is. The public hates this economy, it would be politically, a great time to simply oppose an out of control executive, and take the path of fiscal rectitude. Instead, the Republicans are starting to reclaim that mantle on the cheap by opposing a few projects here and there, while still dropping the GDP of Iraq into Iraq.

Absent this sweet spot, the public is never going to see a recouping moment of wages, and when the recession hits, it will be deeper and wider than the previous recession. The bad news is that there is another, larger, recession coming after this one, as we continue to scale a new inflationary mountain.

Think of this as the 1975 recession: bad, but only the opening act for the destabilization of a massive dollar glut.