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Archive for October, 2008

24 Days Until 24, Season 7 Debut

Yes, it was too cute not to say.  24 days until a new season of 24.  Interesting, because it feels like roughly 24 years since the last season of 24.

They have a teaser trailer up.  More details at BuddyTV.

Happy Birthday, Jo Jo

It’s hard to capture the delight of a 2 year old hearing the song “Happy Birthday”.

Happy Birthday, Jo Jo!

Applications are LIVE on LinkedIn

I am beyond happy to announce that the LinkedIn Application Platform is now LIVE on the site.  You can go to LinkedIn right now and experiment with almost a dozen new ways to build and share content with your colleagues and contacts.

As you can see from my profile, I’ve already added posts from this blog using the WordPress application (anything with the tag “LinkedIn”), selected books from Amazon, and a presentation I recently gave at the PDMA conference in Orlando using Slideshare.

The LinkedIn blog has all the details.  Also, as a bonus, there is a fairly nice launch video featuring Reid to announce the new platform.

For me, it’s especially gratifying to see these applications come to life.  It was just about this time last year that I gave an initial presentation with Elliot at Google on the concept of leveraging social applications for business and professional use.

My personal favorite is the Company Buzz application.  As a concept, this app began as an intern project this summer, and grew into a really compelling use of Twitter for business.  (At LinkedIn, we actually have an RSS feed of every Tweet with the keyword “LinkedIn” projected on a 50″ TV on the wall where the Product & Engineering teams sit.)

More to come… this launch is just the beginning.

LinkedIn Search: The Next Generation

Kudos to Esteban & the entire search team.  We’ve begun public testing of our next generation search engine on LinkedIn.com.

LinkedIn Blog: LinkedIn Search: Finding Just Got Easier

As the largest global professional network, we’ve had the privilege of having millions of users enter over a billion professional search queries, and we’ve been working hard to build a much more robust professional people search engine. We interviewed lots of users and aggregated thousand of pieces of feedback. The end result is a completely redesigned search experience aimed at making it easier and faster to find the most relevant professionals that you’re looking for.

Esteban wrote a great blog post, so rather than replicate it here, I’ll just recommend that you click through and read about all of the new features.  We’re still in testing, so the product isn’t finalized, but it’s a top-to-bottom rearchitecture and redesign of the search engine, and I’m incredibly proud of the team.

So, check it out. There is a link in the upper right of every LinkedIn search results page to opt into the test.

Of course, if you want to cheat, clicking this link will automatically opt you in.

Let us know what you think.  I’ve been using the new search exclusively for four weeks now, and I have to say it is changing the way that I use LinkedIn.  Just the speed alone is worth the switch.

Goodbye, First Spouse Gold Coins. I’m Over You.

Just posted the first of my First Spouse gold coins on eBay

2007 First Spouse Proof Martha Washington Gold Coin

For those of you reading my blog for a long time, you know a couple things about my history with this series:

I’ve decided that this series of coins isn’t for me… it’s too much cash tied up in coins, and frankly most of the first spouses just aren’t that interesting to me.  I may buy one or two in the future (Jacqueline Kennedy?), but I’ve decided to opt out of the full series.

As a result, I’ll be selling the first five off at a rate of one a week.

I think I’m going to steer clear of the more trendy, obvious collector-bait series going forward.  Yes, Native American $1 Dollar Coins, I am talking to you.  Of course, I am a sucker for truly beautiful new efforts.

Just remember, all bids on eBay are binding.  And you must bid from a PayPal account with a confirmed address.

Why the Price of Gold is Sinking Fast

The price of gold has dropped below $700 an ounce, and that has a lot of people in the precious metals community puzzled.

After all, isn’t gold supposed to be a safe haven in times of financial depression and panic?  And if these aren’t times of financial depression and panic, what are?

After all, every country in the world is busy running their printing presses to fund bailouts and fight deflationary forces.  Gold should be on its way up, not down.

If you want to see a good article on the topic, there is some nice coverage here on Marketwatch

Gold futures hit a historic high above $1,000 an ounce a few days after Bear Stearns was taken over by J.P. Morgan Chase & Co. on March 14. But in the recent round of crises triggered by the collapse of Lehman Brothers Holdings Inc. gold has fallen to below $700 for the first time in 13 months. The metal has so far lost nearly $170 this month.
The reason, according to analysts at the World Gold Council, is that the latest bout of the credit crisis has been deeper and more far reaching. Funds were forced to sell desired assets such as gold to meet margin calls, while weakness in European economies lifted the U.S. dollar, which then pushed dollar-denominated gold prices lower.
One of my readers commented today on a blog post I wrote back in August 2007, “The Lessons of Long Term Capital Management (LTCM) & The Volatility of August 2007″.  That article is actually some of my better commentary to date on why historical diversification of assets isn’t helping very much in this downturn.  Here’s a snippet:

This decade has seen an amazing boom in investment tolerance for non-traditonal asset classes.  People freely talk about how different new investment assets have a “low correlation” to the stock market.  Real estate, commodities, rare coins, art, collectibles, long/short funds, you name it.   As a result, across the world, trillions of dollars are now factored into different asset classes, prudently distributed to minimize risk and maximize reward.

This would all be fine except for one thing.  And it’s the one thing that more than anything led to LTCM’s demise.

That one thing is that all of these great measures of risk are based on historical records.  And as all mutual fund prospectus readers know, “past history is not necessarily indicative of future performance.”

You see, you can take two things that historically have not been correlated.  Asset A & Asset B.  But the minute that an investor owns both A & B, there is now a correlation that didn’t exist historically.  The investor is that correlation.

If Asset A goes down, and the investor needs to sell something, they may now turn to Asset B for liquidity.  And that means selling pressure for Asset B, based on nothing but the asset price of Asset A.  Voila, correlation.

Gold didn’t used to trade like a stock in an ETF that anyone could buy.  It was expensive, hard to store, and was distributed through inefficient, clumsy channels.  It was diversified from other investment classes because it couldn’t be bought & sold easily like stocks or bonds.

Now, buying a Gold ETF is trivial, and can be done for less that $10 a trade with very little spread.  In fact, many commodities can.

All of a sudden, in this market, people are realizing that the investors are the correlation.  And that correlation is much stronger than historical analysis would suggest.

Not to get to gloomy, but re-reading my August 2007 post, I caught this somber realization:

What’s worse, those historical models lead investors to believe that they have less risk on their books than they do have, which leads rational investors to introduce leverage into their portfolios.  That means when the risk shows it’s ugly head, the results get magnified by the leverage of loans.

That’s what happened to LTCM.  Their models were excellent, but they were based on historical correlation.  The minute some of their investments turned the wrong way, their incredible leverage forced pressure in previously uncorrelated investments.  What’s worse, other investors, smelling the “blood in the water”, discovered this new-found correlation, and pressed trades against them.

So, this scares me a lot, at least intellectually.  There are very good reasons why major investors like hedge funds and other asset managers can’t share their up-to-the-minute holdings.  That means, however, that no one really understands this type of “co-investment risk” that is building in mass across the markets.  Unfortunately, the only way I can imagine to properly handle this risk would be to have a universal monitoring set up to accurately reflect this new type of correlation from mass “co-investment” across assets.

Ugh.

Carter:Bush, Reagan:Obama, Clinton:???

Whimsical pondering on politics tonight.

The Conscience of a Liberal has had more of an impact on me than I thought.

Let’s assume for a second that Carter was an unmitigated disaster, leading to an opening for a conservative rebirth with a Reagan presidency.  After all, before Carter, Reagan couldn’t even beat Ford for the nomination.

Let’s assume for a second that Bush (W) was an unmitigated disaster, leading to an opening for a liberal rebirth with an Obama presidency.

What might that tell us about 2012, 2016, 2020?

If the pattern repeats, inverted:

  • We’ll have a very hard 2009/2010 economically
  • Bernanke = Volker, and is kept by Obama for stability.
  • We’d see limited military actions in 2011
  • By 2012 it will be morning in America again
  • Obama will over-reach with his liberal tax/spend plans, but will rebalance in 2nd term
  • Obama will be followed by 1-term me-too candidate in 2016
  • We’d see a significant new military engagement/war in 2018-9
  • 2020 will see a fragmentation of the electorate, generating a third party candidate with some form of populist message (Perot analog).  This allows a centrist Republican (Clinton analog) to take office.

People want to map Obama to FDR or JFK.  But the parallels to Reagan, inverted, seem stronger.  The complete humiliation of Mondale in 1984 seems likely to repeat for Republicans in 2012 if they don’t adjust, and it seems like this election will be close enought that conservatives will argue McCain wasn’t conservative enough.   It’s only complete, abject humiliation ala-1984 and 1988 that makes a party redirect.

The pattern can’t be perfect, since Reagan had to deal with a Democratic Congress throughout his Presidency.  Obama is getting the Clinton 1992 situation with one party rule (similar to the Bush 2000 situation… yes, it’s not a good pattern historically).

Of course, I’ve also been known to muse about a Chelsea Clinton candidacy in 2020, since she has many of her father and mother’s best traits, without the baggage.

Goldman Sachs, McGraw-Hill, SAP & LinkedIn

News is out now, on the LinkedIn Blog:

I’m happy to announce today that we’ve received strategic investments in LinkedIn totaling $22.7 million from market leaders in the enterprise software, investment banking and business information sectors; all of whom believe in the power of LinkedIn as a way to connect professionals and help them be effective. This round of funding includes world class strategic investors Goldman Sachs, The McGraw-Hill Companies, and SAP ventures; as well as a re-investment by Bessemer Venture Partners.

This financing is a follow-on of the Series D round of funding we announced in June of 2008, in which we raised $53 million. Led by Bain Capital Ventures LinkedIn’s Series D financing round has raised $75.7 million. You can find my thoughts on our Series D announcement here.

Can’t comment here publicly too much beyond the official statement, but TechCrunch has already picked up the news as well.  The reality is that it is a great advantage to have capital in a capital-starved environment, particularly when there are such large growth opportunities available in a new market.

Apple Q3 Results: iPhone outsells Blackberry

Wow, that was fast.

Remember when it took more than 15 months for a new entrant to dominate a multi-billion dollar industry with a brand new product & platform?

MacDailyNews has a brief readout of some of the mobile stats from today’s earnings announcement from Apple.  Some highlights:

  • Apple is now the 3rd largest mobile device maker by revenue at $4.6B, second to Nokia & Samsung.  RIM is a distant $2.1B.
  • By units, Apple outsold RIM Blackberry in Q3 by a clear margin, 6.9m units to 6.1m units.
  • Apple has sold more than 10m iPhones to date, which was their 2008 goal.  Clearly ahead of target.

It’s a shocking outcome on multiple levels.  First, the Blackberry is firmly entrenched as the dominant mobile platform in business.  Second, the average unit price of the Blackberry is much, much lower than the iPhone, thanks to the low prices on the Pearl models.

So just a little over a year after launch, Apple is selling more units than RIM, and at much higher price points.

The march goes on, and faster than expected.  Don’t say I didn’t warn you.

PayPal Micropayments: A Step in the Right Direction

Paypal quietly launched it’s PayPal Micropayments service level this week, and it’s definitely a step in the right direction.  It’s a service that has been in testing and research for quite some time, but it’s nice to see it finally launched publicly.

Here is the new PayPal Micropayments site, which explains the terms.

For those of you unfamiliar with PayPal economics, PayPal charges a fixed fee and a variable rate on every transaction for premium customers.  A premium customer, by the way, is basically anyone who wants to receive more than $500 a month and/or accept credit cards.

The payment scheme is similar to the credit card companies, although of course PayPal charges the same fee for bank & debit payments too.  They even charge the fee on PayPal balance purchases.  There is a reason why PayPal is a phenomenal business in its current form.

The problem is that for low cost items, the PayPal fixed fee can be expensive.  The fees for a basic premium account are:

$0.30 + 2.9% of the transaction.

So, if you are selling a $100 item, your fees would come to:

$0.30 + $2.90 = $3.20, or 3.2% of the transaction.

Not a huge fee, but certainly a significant line item for normally thin retail margins.

Now look at the cost for a $5 item:

$0.30 + $0.145 = $0.45 (rounded), or 9% of the transaction.

Wow.  9% for payment processing.  Hard to build a great business there.

The micropayments service offering fixes this, by lowering the fixed fee, and raising the variable fee.  The new fee structure is:

$0.05 + 5% of the transaction.

So, that same $5 payment now costs:

$0.05 + $0.25 = $0.30, or 6% of the transaction.

6% is still high, but much, much better than the old fees.

Of course, given the scalability & cost issues with PayPal infrastructure, the launch is typically limited in terms of implementation:

  • You can’t really find this on the site, you have to go to the magic micro-site to sign up.
  • You have to sign up for this fee structure separately.  You can have the micropayment structure, or the normal structure, not both on a single account.
  • You have to wait 2 days for the fee structure to take effect.

This means that as an e-commerce seller, you have to keep two accounts open – one for your items over $12, and one for the rest of what you sell.  It also means you have to juggle the fact that PayPal doesn’t like to see two accounts linked to the same bank account, credit card, or email address.

Still, it was fairly trivial for me to set up a new email address on my personal domain, and get the new account.  I’ll start using it immediately on Media items, like used DVDs, that tend to get below $10 prices.

If I was in the eBay selling tool business, I would definitely build in a feature to automatically assign the right PayPal account to listings based on the fixed price or expected final value of an auction.  It probably wouldn’t take more than a day or two to implement.  An eBay seller with $100,000 GMV per year, with 50% of items below $10 could likely save thousands of dollars with this technique – that’s margin that is worth taking.

I’m not sure this fee structure will get PayPal into the true micropayments arena.  If they want to be collecting payments under $1, they will really need a fee structure that operates on the aggregate – grouping together charges like they do for iTunes to minimize charges.  Still, I’m glad to see them make at least this small step forward.  It must not have been easy to face the potential cannibalization for existing sellers who are using PayPal today on eBay for under $10 items and who will move to this payment structure.

What would be great is a true wrap account from PayPal that would mix together a true micro-payment pricing (sub-$1), low price item band (sub-$10), and regular merchant fees, with PayPal handling all the aggregation and management to deliver payments for a broad product line at a fixed rate based on monthly volume.

Still, I’m sure there are a few people at PayPal who slaved over this recently, and I do want to say to them thank you for shipping it.  I’m hoping this will help make selling lower price items viable again for me.

American Buffalo, Meet the Ultra High Relief Double Eagle (2009)

I think tonight is my night to catch up on topics that I haven’t blogged about in a while.   Why not add gold coins to the list?

If you haven’t followed the news, the financial crisis has led to a significant increase in demand for gold bullion coins.  Demand has been so high, in fact, that the US Mint temporarily stopped selling the 0.9999 pure gold American Buffalo coins.  As per the US Mint press release:

Demand has exceeded supply for American Buffalo 24-Karat Gold One-Ounce Bullion Coins, and our inventories have been depleted. We are, therefore, temporarily suspending sales of these coins.

Much of this demand has now shifted to the Canadian Maple Leaf coins, which are in limited supply, but still available.

Browsing the US Mint website, I noticed the following information for the new, 2009 Ultra High Relief Double Eagle, debuting in January.

Next January, the United States Mint will issue the 2009 Ultra High Relief Double Eagle Gold Coin. This coin promises to fulfill Augustus Saint-Gaudens’ vision of an ultra high relief coin that could not be realized in 1907 with his legendary Double Eagle liberty design.

2009 Ultra High Relief Double Eagle Gold Coin Obverse
2009 Ultra High Relief Double Eagle Gold Coin Obverse

The 2009 Ultra High Relief Double Eagle Gold Coin will show the Nation and the world the very best the United States Mint has to offer. The 21st century vision of the United States Mint, combined with technological advances, enabled the United States Mint to realize the previously unattainable goal of making the coin accessible to all Americans.

Through 21st century technology and the vision of Director Ed Moy, original Saint-Gaudens coin plasters were digitally mapped by the United States Mint. Using the digital design and die-making process, the Saint-Gaudens sculpture — in ultra high relief — has been updated to reflect the year 2009, an additional four stars to represent the current 50 states, and the inscription “In God We Trust,” which was not on the 1907 version.

It does look like a gorgeous coin.  But do we really need:

  • The 22K Gold Eagle, in 1/10, 1/4, 1/2, and 1 oz. varieties, in proof and uncirculated versions
  • The 24K Gold Buffalo, in 1/10, 1/4, 1/2, and 1 oz. varieties, in proof and uncirculated versions
  • The 24K Ultra High Relief Double Eagle, in 1 oz.
  • The 1/2 ounce Presidential Spouse coins, at a rate of 4 per year

The problem with collecting gold coins is that, well, they are pretty expensive.  With gold between $800 and $900 an ounce these days,  you can imagine the ongoing cost of trying to complete these series and collecting the different versions.

The new Ultra High Relief Double Eagles do look extremely interesting.  I hope to see one in person when they debut in 2009.

Enough with the Election… Battlestar Galactica Updates

Yes, I’m tired of talking about the election and the economy.

Let’s go back to one of my favorite topics: Battlestar Galactica.

We are now exactly three months from the launch of the final ten episodes.  They will start at 10pm, Friday, January 16th, and go through until the finale on March 20th.

Additional fun to look forward to:

  • The Caprica premiere movie is in production, with teaser trailer now available.  No date announced yet, but this is the movie set before the first Cylon war, tracing the story of Admiral Adama’s father.
  • Another Battlestar Galactica movie, set between Season 2 & 3, will also debut in 2009, directed by Edward Olmos, and be told from the Cylons’ point of view.

More information here on BuddyTV.

Now, quit reading if you don’t like spoilers.

It’s hard to ignore the Caprica story line and its potential impact on the concept of the Battlestar Galactica plot.  The idea that humans developed humanoid cylons earlier in the timeline is hard to rationalize with what we know now.

We have ten episodes to find out:

  • Who is the fifth cylon?
  • Why are the final five different than the other seven?
  • What does it mean that all this has happened before, and will happen again?
  • Why did they say that Adama was a Cylon?
  • What happened to Earth?
  • Which came first, Earth or Kobol?
  • Will the non-humanoid cylons rebel against the humanoid cylons?
  • What is the fate of the human/cylon hybrid children?

Any other questions?

Financial Advice for the Current Market Conditions

I have a special attachment to Saturday Night Live, since it debuted the same year I was born.  This skit is genius, and summarizes the best financial advice you are going to get this year.

It’s called:

Don’t Buy Stuff You Can’t Afford

Scene: a typical American kitchen. A husband (Steve Martin) and wife (Amy Poehler) are puzzling over their finances.

Wife: Oh, I just can’t get these numbers to add up
Husband: Like we’re never going to get out of this hole.
Wife: Credit card debt, does it ever end?
Salesman: [entering from who-knows-where] Maybe I can help.
Husband: We sure could use it.
Wife: We’ve tried debt consolidation companies.
Husband: We’ve even taken out loans to help make payments.
Salesman: Well, you’re not the only one. Did you know that millions of Americans live with debt they can not control? That’s why I developed this unique new program for managing your debt. [Holds up book] It’s called, “Don’t Buy Stuff You Cannot Afford”
Wife: Let me see that. [Reading from book] If you don’t have any money, you should not buy anything. Hmmm … sounds interesting.
Husband: Sounds confusing.
Wife: I don’t know honey, this makes a lot of sense. There’s a whole section here on how to buy expensive things using money you’ve “saved”.
Husband: Give me that. And where do you get this “saved” money?
Salesman: I tell you where and how in Chapter 3.
Wife: OK, what if I want something but I don’t have any money?
Salesman: You don’t buy it.
Husband: Let’s say, I don’t have enough money to buy something. Should I buy it anyway?
Salesman: No.
Husband: Now I’m really confused.
Salesman: It’s a little confusing at first.
Wife: What if you have the money, can you buy something?
Salesman: Yes.
Wife: Now, take the money away. Same story?
Salesman: Nope. You shouldn’t buy stuff when you don’t have the money.
Husband: I think I’ve got it. I buy something I want, then hope that I can pay for it. Right?
Salesman: No. You make sure you have money, then you buy it.
Husband: Oh, then you buy it! But shouldn’t you buy it before you have the money?
Salesman: No.
Wife: Why not?
Salesman: It’s in the book. It’s only one page long. The advice is priceless and the book is free.
Wife: Wow. I like the sound of that.
Husband: Yeah, we can put it on our credit card.
Announcer: So, get out of debt now. Write for your free copy of “Don’t Buy Stuff You Cannot Afford”. And, if you order now, you’ll also receive, “Seriously, If You Don’t Have the Money, Don’t Buy It” along with a twelve month subscription to “Stop Buying Stuff” Magazine. Order today.

You can watch the video here.

Genius.  Pure Genius.  I feel like I’ve actually had this conversation with people before.

Problems with Obama’s Tax Credit = Tax Cut Accounting

I normally stay away from politically tinged posts.  Tonight, I’m posting two.

Call it formal recognition that the McCain candidacy is a lost cause, and that Obama is going to take the White House.  Futures on a McCain win are now down to 15.5% on the Iowa markets, even lower on the Intrade markets.  That’s bad for him, and good for everyone afraid of a McCain victory.  Since the Democrats will likely retain Congress, we will have, for the first time since 1992-1993, a full Democratic sweep.

So the topic turns to Obama, and what he’s likely to do in the next four years.  Obama, like Clinton, actually has a wide set of very smart economic advisors.  Unfortunately, they literally cover the spectrum of economic policy, from conservative to liberal perspectives.  Like Clinton, it’s hard to tell ahead of time which direction he’ll lean on once he’s in office.  It’s Robert Reich vs. Robert Rubin all over again.

This opinion piece ran in the WSJ last week, and it got me thinking.

Originally, I thought Obama’s tax plan was quite clever:

  • You can’t argue that income disparity hasn’t become extreme in the past decade
  • You can’t cut the taxes of most people, because 40% of Americans don’t owe any taxes
  • Most people will not accept higher tax rates to fund new entitlements/distributions
  • Solution: Effective negative tax rates!  That allows a progressive tax system to extend into the non-taxpayer minority, without having to approve new distributions.

The WSJ article, however, got me thinking about the accounting for all this, and it has some scary implications.  From the article:

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation’s Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The basic idea is that Obama will change a large number of deductions to refundable tax credits.  That means that, effectively, a large minority of Americans will actually be paying negative taxes.

The problem sounds like semantics, but it has accounting implication:

When is a tax credit just a distribution?

Why does it matter?  Well, a tax credit is just treated like a negative tax.  So if I tax one person $1000, and give a tax credit of $200, it’s treated like $800 of tax revenue.

Welfare is treated like an expenditure.  If I tax one person $1000, and give $200 welfare to another, we declare $1000 of tax revenue, and $200 of spending.

Both net to $800, but have very different implications for the size of government and the perception of spending.

By using tax credits, Obama can state, with a straight face, that he isn’t going to raise taxes, he’s just going to redistribute the burden more fairly.  And technically, he’s correct.

However, if you treat tax credits as entitlement spending, then you see that what he actually could do is radically increase the tax burden on the country, but cancel out a large volume of transfer payments from the spending side of the equation.  So it looks like the tax burden has stayed the same.  It looks like spending has not increased.

But really what’s happened is that a whole new set of entitlements and taxes have come into existence, but cancel themselves out where no one can see them.

This may not sound like a big deal to you, but this type of accounting shenanigan looks highly prone to abuse.  Imagine what our debate about Social Security would look like if Social Security checks were positioned as tax credits instead of distributions?  Medicare.  Welfare.

I’m not saying that Obama will abuse this system per se, but it’s a bad accounting precedent, started by the Earned Income Tax Credit.  The CBO and GAO should declare that tax credits are distributions, and shift the accounting accordingly.  That would provide accurate transparency in the system, while still giving the government flexibility to tax & spend as it sees fit.

I’m not eager to see Enron-style accounting on this scale.

Update (10/16/2008): A few people have asked me for a concrete example of the problem here.  Here is an exaggerated one:

Imagine that Obama sets the income tax rate to 100%, and then gives back 80% of the money in tax credits.  By the Obama accounting, the government’s take would only be 20% of GDP.  However, in actually, the government has confiscated 100% of all income, and redistributed 80% of it.  The 100% is the number that truly reflects the government take, not the 20%.

Why the Liberal Political Engine is Working in 2008

“You have a great name. He must kill your name before he kills you.”

Juba, from the movie Gladiator

I’ve almost finished reading Paul Krugman’s The Conscience of a Liberal.  I’ll post a formal book review here soon, but right now, I wanted to highlight one of the insights that I gained from the book.

As a preface, Paul Krugman is a brilliant economist.  I’ve linked to his work here on this blog before.  He also, I’m afraid, is suffering from the aggressive form of anti-Bush psychosis – he hates the man & his policies so much that it’s pushed him into aggressively politicized commentary.  But it’s a common ailment these days, and likely to subside in the years to come.

However, in The Conscience of a Liberal, Krugman does the best job that I have ever seen laying out the principles and case for an aggressively liberal economic agenda in the United States.  Obama hints at these elements at times, but rarely pieces them together as effectively as Krugman does in this book.

I’ll save my evaluation of his analysis for a later post, but I wanted to highlight the reason that I think Obama & Krugman are onto something powerful politically here in 2008.  Sure, the timing is good:  Iraq, Katrina, and now the housing/financial crisis are a great backdrop for change.  But 2008 doesn’t feel like 1992 does it?  Let’s remember that the only people with a lower popularity than our Republican President is our Democratic Congress.

Here is my theory:

The liberals have learned, and learned well from the mistakes in 2000-2004.  They can’t defeat the conservative economic agenda of the past thirty years without killing the names of the heroes of those years.  Clinton made this compromise, but while it preserved him even in the face of the 1994 Republic Congressional wins, it didn’t make the party stronger.  As recently as 2004, people were talking about a permanent Republican majority.  (Yes, it wasn’t that long ago).

No, to win, they have to convince the American people that the entire last 25 years were a mistake.  The economic boom and resurgence of productivity post-1982 didn’t happen, or was fake in some way.  Reagan was not a great President.  Milton Friedman was not a brilliant economist.  Robert Rubin was not a great Treasury Secretary.  Alan Greenspan was not a great Federal Reserve Chairman.

Yes, to do this, they will have to throw Clinton & Rubin under the bus.  But that just might be the only way to really sell a liberal economic agenda.

Obama actually doesn’t stick to this line clearly – he has made “mistakes” in his campaign by praising Reagan and Clinton at times.  He’s inclusive, right?  But reading Krugman’s book gave me a clearer insight into the strategy, and it’s not a bad one.  Convince everyone that the last 25-30 years of economic progress/thinking was a mistake.  Rewind to the New Deal and the decades after it as a lost ideal.  Map the past thirty years to the 1890-1928 era.

Of course, intellectually, it’s not a terribly compelling position.  You aren’t going to be able to re-create the economic conditions of post-WWII America ever again, globally.  And of course, we now know that huge pieces of the government response to the market crash of 1929 were counter-productive, extending the Great Depression.  The US Government share of the economy is now close to 19% compared to less than 5% in the 1929.  Analogies to the 1960s really don’t help either, since the 1960s led to the 1970s.  Ugh.

Still, I think the strategy has legs.  If they can kill the economic heroes of the past 30 years (Friedman, Reagan, Rubin, Greenspan), we might really see a successful liberal economic agenda in the United States.  The combination of the Bush Presidency with the current economic morass produces an ideal backdrop for reconsidering economic policy.

Watch the news.  I’m seeing elements of this meme everywhere now.  It seems to be taking hold, even if people don’t see the pattern.  Example: Culprits of the Collapse, soon to air on CNN.

“You have a great name. He must kill your name before he kills you.”

Juba, from the movie Gladiator

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