Barak Obama continues to prove that he is the farthest to the right of all of the remaining Democratic Candidates. If John Edwards needs motivation to stay in, it is that he should reflect on just how bad a tax-cutting, no-universal-health-care president will be for those in or near poverty. Obama is in bed with the stupidity got us into this mess, only stupidity can get us out crowd. We don't need more stupidity.

There's also the problem that Hope may not be warranted at this point. Economically, hope is exactly what we've been doing. Invade Iraq, and hope it works out. Iraq has worked out the way it was going to: we are declaring defeat and going home, turning over Al-Anbar to the very people we have been fighting for lo these many years, and accepting a de facto partition of the country. Failed states are the shrift that keeps on shrivening.

What we are facing is that the paper-for-oil economy is about to be tilted much much harder in favor of the people selling oil.

Essentially the Thatcher-Reagan solution to the problems of the 1970's was to accept that the developed world could no longer produce enough oil internally, and that the easiest way to avoid inflation was to sell paper to the people selling oil. The Clinton codicil to this was to constrain the flow of government paper. These two pieces did the one thing that Americans demanded: end the chronic inflation of the 1965-1980 period, even though a great deal of that end was demographic and technological.

Nominally inflation is nowhere near those soaring heights, but then, one man's inflation is another man's pricing power. In the present, people have nowhere near the ability to increase their wages that they did during that period. Americans are finding out that they don't have inflation, because they don't have the ability to demand and get higher wages.

This brings up an another important point about inflation. Inflation can be defined as less happiness for more money. Whose happiness and whose money becomes essential in measuring inflation. If what your central bank wants to do is measure the likelihood of foreign bond holders dumping the dollar, inflation looks very different from how it looks if it wants to measure the ability of the nation to field and equip a general warfare army. In essence, Vietnam proved that a mass mobilization military could not win the wars we faced. The solution was to declare defeat and go home.

Iraq has proven that it is impossible for the light military which is the natural consequence of a society whose resources are constrained in labor terms to win the wars we face. I say this because imagine what would have happened to wages if we had had an additional million young people under arms, during a time of rapid expansion in the housing base.

The Liberal era of states fought wars: the dual war of World War II, Korea, Algeria, Post-Colonial Conflicts, Vietnam. It won most of them. The neo-conservative state fought very small wars: Falklands, Grenada, Panama, Iraq. It won most of them.

However the signature war of the end is the war where the tools and economy which were developed by that state were manifestly unable to deal with the consequences. In both cases, however, defeat is chimerical: victory in Vietnam would not have stopped the Middle East from rattling apart and leading to inflation. Victory in Iraq would have bought only a few more years of prosperity, and another economic cycle.

In both cases, the real mistake was not the economy and the military, but the failure of the political class to avoid being drawn into a war they couldn't win, because it was the wrong war. In both cases, failure was a team effort. Both parties backed Vietnam, both parties backed Iraq. The press backs Iraq to this day.

The two major Democratic candidates are both running on the belief that with careful management we can continue the paper for oil economy and that events still might break our way. This is again the baby boom paradigm. They see this as the election of 1960, when what was needed was a correction, not a change in basic approach. However, we are really not in that particular moment of the economic cycle.

Instead the fundamental shifts that need to occur are not hard to see. The United States will soon not be able to repackage mortgages as paper. This means that the United States, one way or another, is going to become an export economy. Either we are going to export what we make, or what we control. Gone are the days when gleeful voodeconomists said that all the Saudi's were getting was paper while we were getting the oil.

Now it turns out that the Saudis were getting control over what we made with the oil. It's like, who does better, the guy who sells you a big mac, or the guy who does your quadruple-bypass surgery?

What is important to remember is that the United States has reserves of resiliency that other nations cannot easily match. China, India, Canada, Australia and Russia alone have land mass, and none of them has the combination of quality and climate. Global warming may well change Canada into a major power, just as Global warming threatens Australia's long term health, but these are distant things. In the short run, the United States, if it can deal with the entangling financial and structural problems, is still the nation to bet on in the rebound.

To get there, however, means changing the cost structure. Right now old manufacturing is loaded down with costs. This needs to change, and it will, either by what Daniel Gross calls "the great cram-down" of the retiring baby boom, or by spreading the costs over the economy.

One of the major failures of the last 30 years is that while the government has used its credit to bail out the wealthy, not once, but repeatedly, the public has taken the risks, but gotten nothing in return. This is stupid. Why are Americans paying for the bailouts and not geting what every other investor demands, namely a share of control of the future direction?

One of the biggest steps that the Progressive movement can take is to have confidence again in industrial planning. China is an economy with extensive planning. The United States has, as its export industries, computers, aerospace and finance - all of which are either extensively driven by Government demand and planning, or intimately related to regulation.

Part of this realization is giving up on the idea that monetary policy is endogenous and neutral. Instead it favors short term flipping of assets based on low capital production. Say houses.

The problem with this is that it encourages localities to do things which are not in the national interest, buy building out housing and franchises - the kind of mini-capitalism they can attract - which the national entity must supply with external resources. This is the heart of the paper for oil economy - selling the profits of those houses to pay for the oil that they need.

Corresponding to this has been the failure of the Federal government to pay for many effects of national decisions. One example is immigration. The wave of immigrants into the US is a direct result of the weak dollar policy that is being used to pay for Iraq. Yet the federal government pays only a sliver of the costs associated with it. However the brontosaurus in the living room is, of course, health care.

The neo-conservative and neo-liberal ideologies which we have feast off this tension, but do not have a solution. However, liberalism, the unreconstructed kind, does. And that is planning: creating incentives to build what has the best net profit over its life span, even in places where the economy does not produce those incentives by basic price signals.

John Edwards has, too late, understood that this is going to require a fighting spirit, and that the progressive movement will align behind those who fight. It is happening now, merely too late to save his candidacy. Though should he soldier on, he might well come to the convention with a large enough bloc of delegates to put populism and progressivism back on the table.

Faith in planning is not a phantom. The Free Market did not plan for the oil supplies needed to feed globalization, even as the market rushed to globalize. If a system cannot provide the objective supports of its own policy, it fails as a means of long term governance. One can't say the market didn't know the result of mechanizing China.

Faith in planning rests then on a few simple pillars. One is correcting the supply-demand-sink problems of energy. There isn't enough energy in an easy to use form; if there were, we would burn more of it until we are back in the current quandry, and even if we could, it would create catastrophic climate change. Another is in the area of medicine. A third is in the radical shift in world population that is going to produce several young waves in the mechanizing world.

Planning then, and a faith in the public consensus to drive decisions - people know what needs to be done, but do not seem to want to vote at this time for someone who will promise to do it - is an essential take-away from this crisis. Someone is going to be doing the planning, and someone is going to be doing the bailing out. Basic notions of property would want these to be the same thing.

They are not presently and that lack of moral hazard - where those speculating with the Grenspanwashing of the world did not bear the consequences - is why we had this monetary bubble in the first place.