Francisco de Narváez is not the sort of person you'd expect to build a political platform around the idea of normalcy. He’s a Colombian-born businessman with a big black tattoo on his neck who inherited the family supermarket chain back in the '90s, then built it into a business empire, with stakes in agriculture, clothing stores, and even Argentina's leading newspaper, Clarin. Not to mention, in the last four years, he's mysteriously managed to increase his wealth by about 900 percent, prompting authorities to launch an investigation into his business dealings earlier this month (the rumor mill is buzzing about a drug connection).

But voters in Latin America's third-largest economy seem ready to give his brand of normalcy a try.

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This morning The Wall Street Journal hosted a breakfast with uber-investor George Soros, the man who "broke the Bank of England" by betting against the pound and earning a billion dollars for himself in the process. Last year, in the midst of a declining market, he came out of retirement to take control of his Soros Fund Management, and was up nearly 10 percent in a year when the S&P 500 shed about 40 percent. Below are selected quotes and ideas:

On the origins of the crisis: A "super bubble" inflated over the last 35 years. Every time it looked set to pop, regulators took drastic action, only to allow it to continue inflating. How can we be confident it's pricked for good this time? "I think the evidence is pretty conclusive."

On the next steps: We are, for the first time, simultaneously concerned about both inflation and deflation. Since September, the Federal Reserve has expanded its balance sheet from $800 billion to about $10 trillion. "You have the makings of runaway inflation." Inflation fears are likely to force the Fed to raise interest rates, which will stomp on the "green shoots," curtail growth, and lead to stagflation. But, strangely, "I think that is the preferable outcome." The alternative is deflation, which would only worsen our "crushing" debt load.

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Our Rio de Janeiro correspondent, MacMargolis, delves into a new microfinance study and wonders whether the much-lauded sector is about as efficacious as a subprime CDO and as bubbly as a Pets.com equity option. --BWS

The international financial crisis has destroyed many certainties,but one of the touted survivors is the old saw that small is beautiful.Sure, no one is flogging mansions to paupers anymore. But microfinance is still flourishing, and even expanding. Ever since Bangladeshi economist Muhammad Yunus started handing out small loans to the poor in1974, the idea that a little credit can help peasants and simple villagers climb out of poverty has swept the map. Civic groups, the World Bank, even commercial lenders have gotten into the act, capturing millions of barefoot clients across the developing world. Today microfinance is a global growth industry. It reaped Yunus the Nobel prize. Even the developed world is catching on. Grameen Bank, the Bangladesh-based microlender Yunus founded, opened a branch in Queens,New York, last year and plans to unveil another in Omaha, Nebraska.Take that, Citicorp.

But hold that confetti...

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When Congress included a “Buy American” clause in the $787 billion stimulus package, mandating the use of U.S.-made iron and steel in stimulus-funded projects, critics decried it as dangerous protectionism. China in particular was displeased; its official news agency likened the clause to “poison.” Turns out two can play the protectionist game. Beijing’s recent decision to stick a “buy Chinese” clause into its own $586 billion stimulus package now has much of the West crying foul.

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The good news? The credit markets are loosening up and banks are lending again. The bad news? They're lending to themselves.

Bank of America and other banks are pumping $1.28 billion into the ailing bank's state-of-the-art ultra-green skyscraper in midtown Manhattan, more than the original amount secured for the building's construction. Bank of America is footing the bill for half of the current loan; the other half comes from Bank of new York Mellon Corp., Wells Fargo, Westdeutsche Immobilien Bank and Helaba Bank.

It's being touted as the first major real estate financing deal to go through since the bottom fell out last year, which is, of course, encouraging news. It's also a source of $30 million a year in revenue for the city and the state, much of which goes to funding the MTA--aka, New York's desperately (and, IMHO, infuriatingly) rusty transit system. So, infrastructure support for public transit. Again, a cause for celebration.

But there's something unsettling about the nature of the recipient. Doesn't Bank of America owe the government some $45 billion? How could they possibly lend hundreds of millions of dollars to themselves at this point--for real estate, of all things? I bounced the idea off Steve Ellis, VP at Taxpayers for Common Sense. Here's what he had to say on the matter:

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I received a rather alarming McKinsey Quarterly report today, which analyzed job prospects in America. McKinsey calculated that 75 to 85 percent of the average American’s pretax income comes from wages from labor (rather than investments). Given the hit that most of our portfolios have taken of late, I’m actually surprised it wasn’t higher. In any case, that puts a lot of pressure on people to earn more if they want to increase their standard of living.

The problem is that 71 percent of us are now working in jobs where demand has been significantly reduced in recent years, and supply of workers has increased, thanks to all the usual reasons (technology, migration, de-unionization, etc). The upshot – we are now very much at risk for yet another jobless recovery, this time one that shuts out not only low end workers, but the middle classes as well.

There were no silver bullets in the report, aside from the obvious – try to join the ranks of companies like McKinsey, which are getting more and more of their revenue from abroad…

This is brilliant: using email traffic to predict a coming crisis. Two computer scientists in Australia got their hands on 517,000 emails sent by Enron employees in the 18 months before the company's demise. They found that about a month before the collapse, communications patterns changed drastically: employees got more clique-y.

For example, the number of active email cliques, defined as groups in which every member has had direct email contact with every other member, jumped from 100 to almost 800 around a month before the December 2001 collapse. Messages were also increasingly exchanged within these groups and not shared with other employees. [The researchers think they] may have identified a characteristic change that occurs as stress builds within a company: employees start talking directly to people they feel comfortable with, and stop sharing information more widely.

If their findings hold up, it means we could have a better idea of which companies are in critical danger, and we could do so without violating anyone's privacy. The researchers didn't even look at the content of the emails, and didn't even need to know the names or titles of those who did the sending. They merely cared how patterns changed and how groups morphed.

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There are a lot of great bits in Charlie Rose's recent interview with Michael Lewis. (The link is here, via Paul Kedrosky. Skip to 21:10 if you don't want to hear him talk about fatherhood.) A couple favorites:

On the "green shoots" theory and the health of banks: "The Obama Administration has been very good at creating false confidence."

On regulators' Wall Street-centered view of the world: "It's in the air they breathe, that they cannot imagine a world without Goldman Sachs. It's not explicitly corrupt, but they think the people who know are the people from Goldman Sachs."

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This latest financial crisis and global recession has been unique in all sorts of ways – from its length and depth, to the fact that almost nobody has come out unscathed. That includes billionaires. While they are usually much better than the rest of us at hanging on to their dosh in troubled times, the latest World Wealth Report from Merrill Lynch and Capgemini found that the ranks of the “ultra high net worth” – that is, people with at least $30 million to invest – shrank by 25 percent this last year. This undoubtedly has something to do with the fact that the super rich were more invested in all those complex, risky securities that have blown up so spectacularly. The plain vanilla rich were hit too, though not quite as hard – the number of people with a mere million to invest shrank by about 20 percent.

The upshot of all this is that the total number of rich people is back down to levels not seen since 2005. But hold the schadenfreude, because a coming boom in emerging market billionaires, led not surprisingly by the Chinese, is expected to kick those numbers up again quickly. It will be interesting to see how this continues to fuel the debate over inequity. The gini coefficient—a measure of the gap between the richest and poorest in a society—is sky high in China (where people with strong ties to the Communist Party control the majority of wealth), and growing in places like India, as well. A recent study by the Asian Development Bank found that as of early last year, a mere 50 billionaires in India controlled wealth equal to 20 percent of the entire country’s GDP, and held 80 percent of the nation’s stock market capitalization. Crony capitalism, anyone?

The news that Barclays, a British bank, will pay $4 million to rename the Atlantic Ave. subway stop in New York City's Brooklyn borough has attracted quite a bit of interest. It does seem odd. Although Barclays made a profit in 2008, it was 14 percent lower than the year before, and sponsoring a mismanaged, underfunded public transport hub might be considered a frivolous expense while the bank still faces the most challenging financial environment in seven decades.

But perhaps, just perhaps, this was a smart move. After all, Barclays acquired much of the dearly-departed Lehman Brothers, so it's probably looking to expand its name recognition in North America. Barclays already plans to sponsor the sports center that will be built at the nearby Atlantic Yards site. Why wait to begin your publicity blitzkrieg when fans walk in the stadium? Better if your corporate logo is on their minds from the moment they start planning their trip to the game.

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Here's a Q&A with the legendary emerging markets guru Mark Mobius, just in from NEWSWEEK's man in Rio, Mac Margolis. Pay attention--Mobius is known for dropping valuable pearls of market wisdom. As managing director of Franklin Templeton Investments, which has nearly $40 billion at play in the emerging markets, he knows that a few green shoots do not an economic spring make. But the rapid recovery of the Brazilian economy has impressed him. FTI now has some $5 billion in the onetime accidental economy, more than in China. Here’s why:

MARGOLIS: Do you share the opinion that Brazil is recovering from economic downturn much faster than expected and will post a respectable, 3-4 percent growth next year?

MOBIUS: Yes, we agree with the view that Brazil will resume to normal growth faster than expected. We are starting to see signs of bottoming out and recovery in the economy with net creation of jobs, increased confidence level, credit spreads coming down, and risk appetite supporting capital-markets operations

How much of a drag will the sluggish world economy be on the Brazilian recovery?

MOBIUS: Obviously, since Brazil is an important exporter of various products including commodities, the most affected sectors were those related to exports, and that will continue to follow the recovery of global markets. [But] the fact that Brazil continues to be more dependent on the domestic economy (it has a relatively low level of trade in relation to GDP) has helped the country to face this economic crisis better compared to other more open countries.

Do you agree that the country's conservative banking regulations and strict stock market oversight are part of why Brazil has avoided the worst of the financial crisis and is now on the path to recovery?

MOBIUS: Yes, we believe that the strict oversight from the central bank of the financial sector has helped the Brazilian market. Also, other factors helped. One is the fact that still a small percentage of the savings were in equities, so the wealth destruction was not as severe as what happened in other countries. Secondly, because the economy is more dependent on domestic demand, the global slowdown has affected Brazil less than it did other countries with more open economies. Third, there was room for monetary stimulus with a drop in interest rates and bank reserve requirements. This was the first time in history that the country was able to execute countercyclical policies to respond to a crisis. In past crises, the central bank needed to raise rates substantially to prevent money from flowing out of the country. Finally, it is very important to highlight that governments proved that institutions are solid in Brazil and regardless of the affiliation, ruling parties committed themselves to economic stability with no capital controls, with floating exchange rate, inflation targeting, and fiscal discipline. A strong indication of Brazilian economy resilience and external confidence has been the high levels of foreign-exchange reserves. They are even lending money to the IMF.

Add this bit to the mounting evidence against the green shoots theory: corporate executives are dumping their share holdings faster than they can say "we've hit bottom and are poised for growth."

According to a new report from California-based investment research firm TrimTabs, corporate insiders--the bigwigs required to disclose their personal finances to the SEC--bought less and sold more in April, May and June alike. So far this month, insiders at S&P 500 companies dumped $2.6 billion worth of shares. Even more concerning is how little they're buying: $120m worth. That's noteworthy for two reasons. Not only is the balance way off kilter, it also just so happens that those meager buying numbers are the better indicators of where insiders heads are at. People sell for a lot of reasons, says strategist Vincent Deluard: they've been given free stock, they're looking to buy a house, etc. But buying is more straightforward; it either means they're optimistic about where companies are headed or they're not. And right now, those looking at the balance sheets are decidedly in the "not" camp.

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There’s plenty of talk about green stimulus plans around the world, but numbers tell a different story. A new report by the OECD, an organization of the world’s richest countries, shows that green efforts in many countries are being thwarted rather than encouraged by the economic crisis. In particular, lower oil prices have slowed the push to adopt alternative energy sources which seemed so urgent last year when oil was $147 a barrel. That will likely change now that oil prices are creeping back up; what’s more worrisome is the sharp slow-down in research spending amongst businesses. Historically, R & D spending moves in parallel with GDP – it slowed down in the early 1990s recession, as well as after the dot-com bubble. Recent evidence based on first quarter corporate results from this year shows that it’s happening again. US venture capital is down 60 percent over the previous year, and declines are similar in Europe and China. Patent applications are down almost everywhere.

This is bad news, because lots of smart economists believe that in lieu of the American consumer, who doesn’t seem likely to re-open their wallet anytime soon, only some sort of major innovation burst--something that really revolutionizes productivity or energy usage--is going to get the global economy back on track longer term. If that's the case, it would come from new technologies, the kind that people aren’t investing in these days. It’s ironic, because there are plenty of examples that show that when countries or companies do up their research investment in a downturn, it tends to pay off in spades. Finland boosted it back in the 1990s, grabbing large chunks of the global telecoms market, and Korea did the same after 2001, increasing its ranking amongst rich countries. Likewise, Google and Samsung came out much stronger after spending in past recessions. Those that don’t, like Western Europe, tend to fall behind. Note to politicians: while you are busy bailing out banks and auto firms, don’t forget tax credits and research incentives for the smaller, more innovative firms that will create the next generation of jobs, and eventually get us out of this crisis.

Before reading this post, I suggest first playing the video below. Consider it a theme song of sorts for articles like the one excerpted below.

Okay, now that you're humming along to the appropriate music, here is the relevant excerpt:

Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

Now that they’ve had their bloody crackdown, the next step for Iran’s mullahs is economic reform. That, after all, is the “China model” they’ve been talking about in Tehran for years. If we give the people a taste of the good life, it will take their minds off political freedom and we’ll get to keep our authoritarian regime. The problem is, there is very little evidence that Ayatollah Ali Khamenei and Mahmoud Ahmadinejad have any clue how to reform and open up their economy the way Beijing’s mandarins did after 1989. Or that they want to even try.

Ahmadinejad, in fact, did the opposite during his first term, embracing socialism and a blinkered populism that devastated the Iranian economy. He strong-armed the Central Bank into driving down interest rates artificially, risking hyperinflation; shifted back to a command economy by slowing privatization; and misused much of the nation’s $60 to $70 billion windfall oil revenues, doing little to ease unemployment. Ahmadinejad’s policies hurt “a lot more than the international sanctions,” which are generally seen as a nuisance that merely drives up the cost of doing business, Saeed Shirkavand, a Tehran University economist, told me in 2007. Shirkavand was one of 59 economists who signed an open letter to Ahmadinejad criticizing his policies back then.

While many Iranians recognized that Ahmadinejad has deepened their country's international isolation with his outrageous and unnecessary comments on Israel and the Holocaust,  most of the criticism of him focuses on his mishandling of the domestic economy.  Hence, if as expected the protests are silenced with force, the discontent isn’t going away. Ahmadinejad’s base is Iran’s poor, but they’ve been as hard-hit by inflation and the tail-off in oil revenues. Now that Khamenei has shown he has clay feet spiritually, and his confederate Ahmadinejad has stumbled economically, it’s hard to see how the China model works for these guys much longer.

I love the story about Argentina's mysterious shortage of coins, or monedas. It's a fun little tale about a bizarre trend, complete with quirky subplots; governments fudging inflation data, coin-rich metro bus companies, which only accept payment in coins, supporting a whole moneda black market. In fact, I love it so much I wrote an article on the matter back when I was reporting out of Reuters' Buenos Aires bureau--and battling with just about every cashier in the city to ensure I had enough coins to take the bus home each day. But that was two years ago. Since then, we've heard from Slate (Yes, We Have No Monedas), Global Post (Where Are Argentina's Coins?), Time (Spare Change? There's None In Buenos Aires), the AP (Argentine Inflation Means Daily Scramble for Coins), and The Wall Street Journal (Argentina Is Short of Cash -- Literally), to name a few. Then last week, The New Yorker's James Surowiecki chimed in (Change We Can't Believe In) on the matter.

Basta! I'm calling it: this story has officially jumped the shark. Apparently, Argentina agrees with me. Today, news comes via the Buenos Aires Herald that the government is finally introducing an electronic ticketing system for trains and buses. If all goes according to plan, people will no longer feel compelled to hang onto their coins for dear life (or, for that matter, grumble about the government's absurdly rosy inflation figures, since inflation may play an underlying role in the coin dilemma...). Argentina and its monedas will live happily ever after.

Maybe it'll work, maybe not. It's possible (likely) that inflation and the mint are far more to blame than the bus system. But even if that's the case, this should make enough of a dent to alleviate the worst of the coin fiasco--and thereby eliminate the need for every foreign correspondent to write about it. So at long last, Argentina watchers will have to find some new flap to track. Fortunately for us, there's rarely a dull moment in Argentine economics, where fiscal disputes tend to play themselves out in the streets amid burning tires and clanging pots and pans. My pick would be this: because of President Cristina Kirchner's controversial farm policies, Argentina--a country so cow-obsessed that its grandest high-society event is an annual livestock fair--is now going to have to import beef for the very first time. Ever. Now, that's not just a shortage--that's an identity crisis.

To Devalue or Not to Devalue: That is the question in Latvia, which is facing the worst recession in the former Eastern bloc. So far they're not devaluing their currency; it's risky, but if it works, it could set a powerful precedent for other small, struggling economies.

Uncle Sam $68 Billion Richer: Ten of the nation's largest banks paid back portions of their TARP money yesterday.

BRICs Still Down with Dollars: Remember that whole spat about the demise of the dollar as the global reserve currency? Whole lotta nothing. BRIC leaders met in Russia this week, but were unable to come to an agreement on a call for a shift away from the greenback.

The Warm Cozy Capitalist Manifesto: Did you like NEWSWEEK's cover story this week? The Atlantic's Derek Thompson was not so into it, arguing Fareed Zakaria should rationalize less and criticize more when it comes to financial follies. In the name of the free exchange of ideas, we at the WON blog encourage you to weigh both views.

How badly do you want gold? Investors, who view it as a safe refuge in an inflationary environment, are paying a premium for it these days, and the commodity closed at $930/oz yesterday. But for some people, it's not enough to buy into a gold-focused ETF or purchase a slip of paper saying you're entitled to so many ounces of the precious metal. Wouldn't it be nice if you could just buy a weighty, satisfying bar of gold from a vending machine?

One German entrepreneur thinks so. Thomas Geissler, owner of TG-Gold-Super-Markt, will install 500 "Gold to go" machines in European locations by the end of this year. The Financial Times tested one in the Frankfurt airport yesterday:

A vending machine in Frankfurt Airport yesterday appeared to be a converted version of a dispenser typically used to sell snacks. For €30, airport shoppers could buy a 1g wafer of gold, and a larger 10g bar was priced yesterday at €245. Gold coins were also on sale.

When the Financial Times bought the cheapest product it was dispensed in an oblong metal box labelled "My Golden Treasure", with a certificate of authenticity signed by Mr Geissler but no receipt and the wrong change. Mr Geissler said he hoped to have a more advanced machine later this month.

I hope that John McClane has been alerted.

Circling Above Wall Street: Could foreign banks do to Wall Street what Japan once did to Detroit? They're busy buying up lots of assets, but questions remain as to whether they can sustain the expansion, given how frequently past efforts to grab business from their US rivals have fizzled.

Brave New Banking World: The Obama administration is set to announce new rules for the banking system today. Simon Johnson has some insights on who's pulling the strings.

Carrots, the New Treasuries: A joint OECD-UN report says agriculture is proving more resilient than other sectors in the economic downturn, predicting that prices will rise 10-20 percent over the next 10 years. Looks like Jim Rogers was onto something...

The Revolution Will Be Twitterized: Social networking just picked up more street cred. President Obama told CNBC that he was "not meddling" in the dispute over Iran's election, but news came out yesterday that the State Department asked Twitter to postpone a scheduled upgrade so as not to interrupt use by Iranian protestors.

Too Good to Be True: Darren Aronofsky, director of Pi and Requiem for a Dream, is set to direct an adaptation of Nassim Taleb's bestselling economics book, The Black Swan. Natalie Portman will star. Next up: Martin Scorcese adapts Keynes' The General Theory of Unemployment, Interest and Money. (Just kidding. The second part, not the first one.)

A Smaller MySpace: The Murdoch-owned company is shedding 30 percent of its workforce.

A "More Diversified" Global Currency System: That's what the BRICs want. They're meeting this week in Russia. My guess is they offer up a couple ominous-sounding statements, but make little headway in terms of binding agreements to diversify their dollar holdings.

Laid Off? Start a Business: Over half of this year's Fortune 500 firms were started in a recession or bear market.

An Interview with Paul Krugman: "The risk of long stagnation is really high." Krugman has become very Cassandra-like lately but he has a Nobel Prize so we more or less have to listen to him.

Checkmate at the Yellowstone Club: The tale of the Montana ski resort for the ultra-wealthy is a familiar one -- reckless borrowing, the over-reaching of the rich, overpaying for property -- but the details are fascinating and well-told.

The Fed Calls the Shots: Should people who buy boats and snowmobiles be eligible for cheaper financing from the Federal Reserve?

This morning, Obama’s chief economic advisor, Larry Summers, gave a talk to the Council on Foreign Relations entitled “Reflections on Economic Policy in a Time of Crisis.” I took away three things from his musings.

1. The government wants to stop running banks and car companies as soon as possible. I was heartened by the fact that Summers kept stressing over and over again that the last several months of policy making won’t have been a success unless “the government is no longer a major player in these [distressed] companies in short order.” It’s no surprise that he didn’t fail to pat the administration on the back for getting back $68 billion of bailout money in 6 months with a profit. As I have blogged and written in the past, I’m not so sure that’s a good thing; I suspect these banks aren’t quite as well capitalized as it might seem, and that more bad loans will come to the surface in the months ahead. Still, I do think it’s positive that the government doesn’t see itself acting as some kind of private equity overlord in the years ahead, interfering in the day to day management of nationalized businesses, which could only be bad news.

1. More regulation of the financial sector is needed, but how that will work is anyone’s guess. As Summers noted, “every three years for a generation, the problems emanating from the financial sector have profoundly disrupted the lives of millions. Surely, our fellow citizens are right to demand greater stability” and oversight of this area. Well, yes. But the question of how regulators making five figures a year can police guys making ten figures a year is still very much up for grabs. And, how to increase regulation without micromanaging banking to everyone’s detriment will be tough. Summers says the administration is working on rules but that the details are “mind-numbingly boring.” That’s something coming from him. But the key it seems will be capital, capital, capital. Financial institutions will be required to hold a lot more of it, to ensure that they don’t have to be bailed out again (see point one above).

1. Larry’s personal charm campaign continues. In the past, if Summers didn’t like a question or couldn’t immediately answer it, he had a way of making people feel that it was simply a stupid question. This time round, when asked a question about the FDIC that he wasn’t sure about, he said, “I’m going to do something I never would have done 10 years ago. I’m going to say, `I don’t know.’” Well done, Larry – now if you can just stop looking bored when other people talk…

The Real Victim of the AIG Bailout: Not the insured or the shareholders or the American taxpayer, but a 26-year-old track runner.

How Much Poorer Are You?: About 25 percent poorer, says Andrew Leonard. Americans have lost $14 trillion in wealth since the start of the recession in December 2007, mostly due to the decline of home prices, stock value, and pension funds.

The Elephant in the Room: BlackRock just became the world's largest asset manager by purchasing Barclays Global Investor. It now has $3 trillion under management.

Public debt is rising at its fastest rate since World War II, as pretty much every country around the world struggles to stimulate its economy. Who’s most at risk from the ballooning debt bubble? It’s an important question, since markets will eventually penalize countries that struggle to service their debt (already, there have been a slew of sovereign downgrades around the world).

Size matters when it comes to debt, but it’s not the only factor -- or even the most important one. Japan, for example, has for years carried the highest gross debt to GDP ratio of any major economy (IMF 2009 estimates put it at a whopping 217 percent), and it will continue to do so in the years ahead as well. Yet the bulk of Japanese debt is owned by the country’s pensioners -- which makes it an internal problem, one that will likely continue to result in slow stagnation rather than any major economic upheaval. Meanwhile, European nations like Italy (109.4 percent), Germany (76.1 percent) and France (72.3 percent) carry very large debt loads as well, but have for some time. For them, high debt is status quo, and while it’s not good for their longer term economic prospects, their politics and institutions are designed to cope with it.

More problematic are countries like the US and the UK, where debt loads used to be relatively low, but are now skyrocketing. Post stimulus, US debt now stands at 81.2 percent of GDP; Britain’s is 61 percent. But UK debt has been increasing fastest of any big nation, rich or poor -- between 2006 and 2010, Britain’s gross debt will have grown by nearly 59 percent. The UK’s fiscal position wasn’t great even before the crisis; now, it’s going to have big trouble adjusting to and servicing the new debt levels, especially as interest rates begin to rise. Already, Standard and Poor’s has downgraded its outlook for British sovereign debt from “stable” to negative. Gordon Brown didn't prepare his country well for any recession -- let alone this weird and prolonged one.

The U.S. is at risk too; its debt load is projected to increase by 45.7 percent between 2006 and 2010. But relative to European countries, demographics will help us. “The best way to lower debt is to grow,” notes AXA chief economist Eric Chaney, and a younger population will continue to result in higher trend growth rates in the U.S. versus Europe. That doesn't mean that we're out of the woods. The other thing that can lower debt levels is inflation -- and it's clear that policymakers are counting on that to a certain extent. But inflation is in a genie in a bottle and once out, is difficult to control. Let's hope that the solution to our debt bubble doesn't turn out to be a painful, 70s style inflation spiral.  

Mr. Lewis Goes to Washington: Ken Lewis, BofA CEO (but no longer its chairman!) testifies before Congress today. Felix Salmon says he did the right thing for the country when he agreed to acquire Merrill Lynch, but probably not the right thing for his shareholders.

Dollars and Sense: Tony private-equity firm KKR is losing its shirt, having borrowed tons of money to buy companies for inflated prices over the course of 2006 and 2007. But Dan Gross reports that one of its acquisitions is still in the black: Dollar General, the dollar store with 8,400 outlets across the country.

You Need to Work on Your Lats: Nouriel Roubini tells us that Latvia's currency, the lat, is about to come tumbling down. Sometimes I wonder if a smart programmer could create a Nouriel Roubini robot that homes in on the day's economic drama and automatically prophesies disaster. Wouldn't that be fun?

Another One?: You're forgiven if you forgot that the G8 finance ministers are meeting this weekend. Wait, is that an important one? Or is the G20 more important? Or the G2? It's hard to keep track. Anyway, Simon Johnson says they should agree to executive pay caps. I put the chances of that happening at roughly negative two percent.

Despite all its oil wealth, Russia may end up being one of the last countries to emerge from the financial crisis. Not only are its banks in shambles, but just yesterday it put the brakes on a 16 year campaign to join the World Trade Organization. Clearly fed up with having to tick off reform boxes for Western powers, Russia’s Vladimir Putin got petulant and told the WTO that Russia would only join if Belarus and Kazakhstan could tag along, too. Given that these countries haven’t even left the starting bloc on WTO admission talks, it’s likely that Russia’s entry will be much delayed – if in fact it ever happens.

That’s bad news, because Russia desperately needs to diversify its economy away from oil, on which it is totally dependant. It’s debatable whether Russia should ever have been a BRIC – as one economist recently said to me, “You could just as easily have stuck Saudi Arabia in there.” The oil hides all manner of ills – Russia’s debt to GDP ratio and deficit figures don’t look as bad as some other countries at the moment, but the minute that oil prices go down, it all goes out the window. Corruption and inefficiency are endemic, and unemployment is rising (at ten percent officially, but probably much higher, especially in industry heavy towns), and the downturn has sparked a number of protests over recent months – just last week, Putin paid a visit to a small factory town where 400 jobless workers blocked a highway for several hours and put on a big show of browbeating local officials and factory owners for not helping workers.

In fact, it’s the Russia central government that’s chiefly at fault. The country needs a wholesale economic overhaul and reform, even in the energy sector, which is amongst the least efficient in the world. The fact that lots of unconventional natural gas is coming online now in the U.S. and Europe should be all the prompting Russia needs to stay the WTO course. When the world no longer needs its energy, it will have even less patience for Russian petulance.

It's the Economy, Mahmoud: As Iran gears up for its presidential election, the economy--not Israel, the nuclear program, or social freedom--is taking center stage. Critics say Ahmedinejad has focused on distributing wealth rather than creating it, and accuse him of fudging the numbers to make his record look better.

More Stress, Please: So you thought it was good news when you heard yesterday that 10 banks would be allowed to repay their TARP bailout money? Wrong, according to Elizabeth Warren. She released a simultaneous report questioning the government's figures and calling for new stress tests.

Going, Going, Gone: Russian central bank officials say they may move some of the country's reserves out of U.S. treasuries and into the brand new IMF bonds.

Remote No More: International brands are determined to tap into India's vast--and vastly undeveloped--rural market, even if they have to send out live entertainers to do their infomercials.

There is no shortage of scapegoats to finger in the credit boom and bust. Exotic derivatives, overcompensated executives, Alan Greenspan, the SEC, reckless borrowers -- all have worn the scarlet letter at one point or another. But the list has not yet been exhausted. Baby boomers, it's your turn.

The Baby Boom lasted from 1946 to 1964, and some 78 million American children were born during that time. As this cohort ages, its sheer size overshadows the rest of society. If you look at an "age pyramid" for the U.S. (shown below), the baby boomers are the metaphorical bulge in the python's throat. 

As this bulge moves from bottom to top, it is having a dramatic impact on the economy. Indeed, the impact is so large that there are hedge fund managers that specialize in picking stocks that will benefit from boomers' buying habits ("Go long on denture manufacturers!").

The big question, of course, is what happens when boomers start to retire. The oldest of them became eligible for Social Security in 2008, and as we move forward in time, more and more of the bulge will switch from middle age -- when they're busy earning and spending -- to retirement, when they start to draw down on their savings. According to the "age wave theory," popularized by money manager Harry Dent in the late 1990s, when the boomers hit this transition point, the U.S. will enter a long bear market, as new retirees start tapping into their pension funds and 401(k)'s, selling their stocks and bonds to pay for their golden years.

Seen in this light, the credit boom and bust was almost an inevitable byproduct of demographics. As the boomers hit their peak spending and borrowing years in the late 1990s and 2000s, they splurged on second homes, SUVs, and went crazy on credit. At the same time, pension funds and retirement accounts peaked in size. There was more money than ever, since boomers had entered their final decade before retirement, and fund managers grew desperate to find attractive returns for the huge piles of cash they managed. Hence, when charming bank salesmen came bearing AAA-rated CDOs backed by subprime mortgages, it was an offer they couldn't refuse. The subsequent crash marked the turning point, after which the boomers will buckle down, try to rebuild their nest eggs in the final years before retirement, and soon thereafter start to draw down on the assets they've accumulated over a lifespan.

This is basically what happened to Japan, which experienced an enormous asset boom in the 1980s -- at one point the land around Tokyo's Imperial Palace was worth more than the entire state of California -- and then a crash in 1990. In the subsequent two decades, the country has grown very little or not at all. The investment managers at Sitka Pacific Capital chalk it up to the factors described above. In the company's most recent investor newsletter, they write:

What happened in Japan in the 1990s was a demographic shift into retirement, where a large portion of the population went from a lifestyle of earning, saving and spending to a lifestyle of not earning, living off assets and spending less. This resulted in less demand for investments like stocks, less demand for housing, and less demand for material 'things' -- and the prices of all these fell.

Today the Nikkei is about 75 percent below its 1989 high. Sitka thinks that the U.S. is "now starting a similar demographic shift into retirement, and that has coincided with what appears to be a peak in spending and debt." If they're right, the current bear market isn't a mere hiccup or even an indicator of a particularly nasty recession -- it's the start of a decades-long slide. (See Sitka advisor Mike Shedlock's blog for more background.)

Is the U.S. really at the same point? One piece of evidence suggests that it is: in 1990, near the start of Japan's woes, the median age was 37.4 years, meaning half the population was older than that. The U.S. today has a median age of 38 years. We're at roughly the same demographic place that Japan was at 20 years ago. Will we face the same future?        

Store this one away in your data bank of random trivia: flight attendants are getting older. Between 1980 and 2007, the median age of flight attendants jumped up 14 years--from 30 to 2004--according to a new study by two Texas A&M researchers.

Why? Civil rights laws made it illegal to discriminate on the basis of age, sex, or race, which meant the airline industry's historical predilection for hiring young, slim, attractive, unmarried ladies had to go by the wayside (there were actually weight and marital requirements back in the day). In subsequent years, which brought rounds of layoffs and hiring freezes, the youngest employees with the lowest seniority levels were often the first to get the boot.

It bears all the markers of bigger trends in the American workforce, albeit on an extreme scale (in the same time period, the median age of all U.S. workers rose six years). While the racial, ethnic, and gender composition of the flight attendant population diversified, inflation-adjusted median hourly wages dropped 26 percent. At the same time, that perennial glass ceiling crept into the equation; while female flight attendants used to make more than their male co-workers--who were probably less senior--they now make slightly less.

There's a cautionary tale here, too. As the economic crisis batters the airline industry harder than ever, its flight attendants are likely to get even older--along with its pilots, who aged six years, and its mechanics, who aged four. In fact, they might even get older at an increasing rate as workers postpone their retirement, putting an additional strain on the industry in the form of health care costs.

So I guess this means Ms. Britney Spears' futuristic imagining of tomorrow's flight attendants won't come to pass...?

The green shoots keep coming in the US, but Continental Europe is still in a deep economic slump. I keep seeing forecasters changing their predictions of recovery from 2010 to 2011. One important reason for this is denial. The IMF expects that financial sector write-downs in Europe are going to be even bigger than in the US over the next year or so, in large part because of trouble in the German banking sector. Yet while both the US and UK governments are busy dealing with their broken financial systems, Europe still has its head in the sand.

I just edited a very interesting piece from our European economic correspondent Stefan Theil, which will appear in next week’s international magazine, looking at Germany’s banking mess, which is (incredibly) even bigger than America’s. It’s amazing that both Merkel and Germany finance minister Peter Steinbruck groan on about the moral failings of Anglo-American capitalism, when their own banks were in many cases more highly leveraged than Wall Street’s, and doing a worse job at investing in all those risky assets, to boot.

As Theil writes, it’s no wonder that politicians in Germany don’t want to face the music – they are deeply implicated in the problems, as some of them sat on the boards of imploding banks, or set unrealistic profit targets for state owned banks in order to generate money to bolster bloated public budgets. Germany as a nation has done the right thing this week by setting a goal to balance its public budgets by 2016. But until it stops focusing on existential worries about capitalism, and starts cleaning up its own screwed up banking sector, recovery will be elusive.

Not So Fast, Fiat: The Supreme Court put a hold on the bankruptcy sale of Chrysler to Italian carmaker Fiat, citing the objections of three Indiana state funds and consumer groups. Fiat says it's in it for the duration, but the delay could put the ailing car giant at risk of going out of business.

Oy Vey, Eastern Europe: Israeli companies, heavily invested in Eastern European markets, are facing bankruptcy risks as a result of the region's severe downturn.

The Wisdom of the '80s: Want a PPIP that works? Make it more like the RTC--the Resolution Trust Corporation--the public-private partnership charged with mopping up the mess left by the S&L crisis.

Today in Unexpected Recovery: Kazakhstan's economy has already hit bottom and headed back to growth. The prime minister told a government meeting chaired by the president that he has seen a "positive trend" since March.

Don't Regulate Me, Bro: Sifma's CEO says Wall Street has issued its mea culpas and is on board for the coming regulatory overhaul. Not exactly, counter Gillian Tett and Aline Van Duyn, reporting that the turf wars over the financial sector's brave new world are just beginning.

There was more buzz around the reserve currency issue today, thanks to China Construction Bank’s announcement that they may start offering trade financing in renminbi. Already, China does lots of currency swaps with Latin America, Africa and other emerging market nations. On the FT front page today, the CCB news was positioned as yet another undermining of the dollar – China is worried about its stability, and thus wants to push the yuan as more of an international currency.

The truth is that China’s “worries” about the dollar are part real, and part political posturing – China is now at a position on the world stage where it can afford to give advice as well as taking it from rich nations. And while it’s certainly true that China wants the renminbi to become more international, that’s partly to bolster its own weakened export position. By doing currency swaps with countries like Argentina, or South Korea, China makes it easier for them to import more of its goods.

The other thing to keep in mind is that while it’s clear that the position of the dollar will weaken over the coming years, nothing is going to take its place as a reserve currency anytime soon. The US dollar still makes up 64 percent of the world’s reserves (according to the most recent IMF figures from the end of 2008), up from 64.4 percent in 2007. That’s not much of a dip. Even if the world’s central banks began switching into euros (the second place currency) at the rate of 1 percent a year, it would take 30 years for the dollar and the euro to reach parity. Bottom line – using renminbi to cut trade deals isn’t the same as getting rid of the dollar as a reserve.

Not Out of the Woods: So much for the green shoots theory. This weekend was full of forebodingabout the future of the American economy, most pointedly with thisTimes op-ed critiquing Obama's confidence-restoring efforts as"dangerously misguided." (It's a must-read). This comes on the heels ofnews that PPIP, behind schedule and losing steam, might be doomed. 

Left in the Dust: The center-right got a big boost in Europe today, winning major victories in the European parliamentary elections. Far-right and anti-immigrant groups also picked up seats. Turnout was at a three-decade low.

An Economical Mideast Peace Plan: Elsewhere in elections, moderates in Lebanon eked out a victory over Hezbollah in Sunday's parliamentary elections. To shore up support for moderation in the region, says one Al-Jazeera columnist, the West should allow Lebanon to join the WTO. Extremism's economic roots, he argues, should not be underestimated. In related news, the EU agreed last week that Russia should be allowed to join the WTO.

Investing in the Wild West (and East): Emerging markets were so five minutes ago. Now, investors are looking even farther afield to so-called "frontier" markets like Nigeria and Sri Lanka too unstable to garner "emerging" status.

Beijing lost a fair bit of face yesterday when Chinalco, a Chinese state-backed aluminum company, was forced to walk away from a $19.5 billion offer to purchase a large chunk of Anglo-Australian mining giant Rio Tinto. The deal was high-profile, and it had triggered all the usual paranoia about Chinese companies and the notion that they are somehow aiming to corner the market on every commodity in order to feed their own (still growing) economy. My favorite quote against the deal was from former Australian Treasury head John Stone: “Once in the spider’s parlor, the fly doesn’t often get out.” How’s that for sinister?

There’s no doubt that China is hungry for natural resources and that its global shop for them is going to continue to be contentious. But the truth is that’s not what killed the Rio Tinto deal. For starters, while there was lots of public protest about the potential buy in Australia (including television ads paid for by opponents of the deal that showed Chinese police quelling protesters 20 years ago in Tiananmen), Australia’s leadership is not anti-Chinese; in fact, just the contrary. Prime Minister Kevin Rudd speaks fluent Mandarin; his daughter married an Australian-Chinese man, and one of his sons studied at Fundan in China. The demise of the Rio Tinto deal was ultimately about business. During the long and very complex negotiations, both the commodities market and the financial markets turned significantly, making it a much better time for Rio Tinto to do a big share rights issue – which is what it now seems to be planning – than it was before. Why give away 18 percent of your company to a controversial buyer when you can raise money on the public markets?

That’s not to say that Australian politicians aren’t breathing a sigh of relief that they don’t have worry about the fall out from Chinalco. The problem is that the failure of the merger will be perceived as a real slap in the face back in Beijing. Back in December when I attended a meeting of Chinese and Western business leaders in Barcelona, I was amazed that the Chinese oil executives in the group were still smarting about the U.S. blocking CNOOC’s bid for Unocal back in 2005. Today, an interesting Eurasia Group report today is speculating that yet another high profile failure might prompt Beijing to take a firmer hand in directing China's multinationals and their acquisitions overseas. It’s funny, because the specter of more state control is actually what seems to worry people who get nervous about China’s resource grabs.

The other important point here is that China doesn’t have to limit its shopping to the West. Already, Chinese oil companies seem to be focusing their recent acquisitions mainly on emerging markets (where there’s plenty of natural resource wealth to be had). It’s likely that other commodities firms will follow. I think this is just the beginning of a larger trend in which BRIC nations – those emerging market giants – will be dealing more and more with each other, deepening trade and financial ties amongst themselves. And why not? After all, developing countries have economies that are still growing strongly – which is more than can be said for the U.S. and Europe.

Welcome Back to Work?: Job losses slow! Job losses slow! Unemployment in the U.S. grew to a staggering 9.4 percent, but the number of job losses--345,000--was the smallest since last September. Could the glimmers of hope be on the horizon? Er, nope, says Felix Salmon. Another Reuters guy, Christopher Swann, sees a double-edged sword in all the pay cuts.

The Bears and the Bulls: Why do markets continue to rally? Ed Harrison at RGE Monitor has three theories, two bearish and one bullish.

Lord of the Flies: Today brings us a new development in the UK expenses scandal meltdown. Finance minister Alistair Darling has apparently fought off Gordon Brown's attempts at an ouster, further weakening the prime minister's position amid a bold cabinet reshuffling and rising calls for his resignation.

Igor of Arabia: Russia has set its sights on the Arab world, positioning itself as a key trading partner with states eager to rekindle Soviet-era alliances. Russian and Arab banks are in talks over possible joint ventures. Meanwhile, Dmitri Medvedev warned Russians that it's "too early to open up the champagne" over a supposed bottom in the economic crisis.

Probably yes. Goldman Sachs yesterday revised their 3 month forecast for oil prices up from $52 to $75, and is expecting it to go up to $90 bucks a barrel within 12 months. The reasons are pretty clear – stores have finally cleared out the leftover inventory that got stockpiled when the recession forced people to zip up their wallets, and factories are starting to produce again—which means they need fuel. The BRIC nations – namely China – are starting to grow strongly again, which is also increasing demand. At the same time, supply is as tight as it’s been for a long time – as Goldman notes in its most recent report, the energy industry is running at 90 percent steam in the midst of the worst slowdown since the Great Depression. Which means it won’t take much of an increase in demand to really make prices soar.

Politics aren’t helping things. Saudi oil minister Ali al Naimi is now talking up $75 a barrel oil, in part because he’s worried about President Obama’s new green energy plans, and how they might affect the longer term viability of the Kingdom. I saw a Eurasia Group brief the other day that speculated that in the short term, Saudis might delay an increase in OPEC production targets, which could have the effect of raising oil prices quite quickly, creating inflation and thus putting the breaks on those “green shoots” in the economy you keep hearing about. The idea is that this would create a climate in which it would be tougher for Obama to carry out his plans.

Of course, over the longer haul, higher prices only increase the motivation to switch to green technologies. Either way, I hope Obama sticks to his guns on green. It is incredibly difficult, but possible, to wean a major rich nation off oil. Just look at Japan. The country, which on track to negative 16 percent GDP growth this year (no, that was not a mistype), hasn’t done much economically right in recent years. But its one unadulterated success has been its energy policy. In 1973, Japan imported 5 million barrels per day of oil. Today, with an economy that’s over double the size, it imports less than 4.2 million barrels. The goal was accomplished thanks to massive conservation efforts (including cities built purposefully to conserve energy), and a massive push towards rail travel (30 percent of Japan’s passenger traffic goes by rail, compared to 0.2 percent in the U.S.). If the U.S. could accomplish even a fraction of what the Japan have on the energy front, we’d all worry a lot less about the ups and downs of oil prices.

New Worry of the Day: Interest: What happens when governments around the world spend themselves silly to fight recession? Interest rates go up, potentially tacking hundreds of billions dollars onto already swollen public debt. According to the Congressional Budget office, a decade from now America's outstanding debt could equal 82 percent of G.D.P., or just over $17 trillion. But the Asian tigers are apparently being much more responsible. "China, for example, is in a very strong position to pay for its stimulus,” said one IMF official.

Angela Goes Solo: Politicians rarely take on central banks in public, and when they do, even more rarely do they gripe that the banks are going too far. Not so yesterday, when German Chancellor Angela Merkel lashed out at central banks for moving away from an independent "policy of reason" in aggressively fighting the financial crisis. Given what we just learned about interest rates today, it's worth checking out the speech itself here.

Rethinking Colbertisme: Does France have a better economic model than its given credit for? The FT examines the French relationship with industry.

The most interesting part of Fed chairman Ben Bernanke's testimony this morning before the House Budget Committee was his unambiguous emphasis on the need to reduce future federal budget deficits. Although there was no explicit criticism of the Obama Administration in his prepared testimony, he suggested that deficit reduction needed to go well beyond announced plans. He repeated the projected deficits for fiscal 2009 ($1.8 trillion), 2010 ($1.3 trillion) and 2011 ($900 billion). The ratio of federal debt to GDP (gross domestic product) would go from about 40 percent in 2008 to 70 percent in 2011, the "highest level since the early 1950s." Interestingly, he used the Congressional Budget Office's projections and not the Administration's slightly more optimistic estimates. "With the ratio of debt to GDP already elevated, we will not be able to continue borrowing indefinitely to meet these demands," he said. The implication was that Congress and the White House needed to balance the budget and not merely reduce budget deficits, as the Obama projections indicate. Bernanke has supported large deficits to combat the recession, but he clearly thinks that there are limits.

Bernanke also reiterated the Fed's view that the economy will turn up sometime in the last half of the year. But he elaborated by saying that the forecast was premised on a) the belief that "consumer spending and housing demand will stabilize"--steep declines will no longer be a drag on growth; b) "the pace of inventory liquidation will slow" and also will cease being a major drag; and c) there will be a "continuing gradual repair of the financial system and an associated improvement in credit conditions." Despite a bottoming out of the downturn, Bernanke repeated his earlier assessment that unemployment would continue to rise for some time.

The benefits and the drawbacks are obvious enough, in the short term. It’s expensive to have fully established bureaucracies chock full of well-compensated officials to deliver police, fire, sanitation, education, and countless other services to only a handful of people. In a state like New Jersey, where a full 566 little towns are squeezed into one of the smallest states in the union (and the property taxes are, as my father routinely gripes, the highest), plenty of people agree that the shift has been a long time coming. Joseph Doria, Jersey's commissioner for community affairs, says the glut of small towns was "created when larger ones broke apart in the late 19th century and early 20th century over family feuds, and over schools and railroads and other reasons." In other words, they changed to adapt to their time, and it's high time that we change to adapt to ours: a new era of bigger, more streamlined models of towns.

Advocates of bigger towns and more efficient services cite a recent Rutgers report that says towns tend to operate along a U-shaped curve of efficiency: tiny towns are the least efficient, small cities between 25,000 and 250,000 are better, and big cities with more than 250,000 people start to drop into inefficiency again. That's not just a Jersey thing; in their literature review, the Rutgers researchers found that the U-shaped curve theory remained relatively consistent across social and cultural divides.

A study of water supply in rural India (World Bank, 2008a) provides more evidence of the U-shape, but in this case, it is applied to households and in a very different context. “The size classes 500 to 1,000 households and 1,000 to 1,500 households have relatively lower cost, compared to smaller or larger piped water supply schemes.” Post-war amalgamation in Japan also showed the U-shaped function, but with somewhat different levels of population, indicating 115,109 persons was the threshold at which efficiency gains would reverse (Mabuchi, 2001).

Case closed? Not quite. Even the authors stress that there was as much inconsistency as commonality in studies on town size. They found "no easy answers, no optimal size, and no ideal government structure" in the literature measuring the correlation between municipal size and cost efficiency; in fact, they said, none of the literature equipped them with much "confidence for further action on a systematic and broad basis."

In the disincorporating towns of the Midwest and the West, it's much harder to see a silver lining in the cost-saving measures. Places on the coast probably have a lot more options than places in Iowa or North Dakota," says Mark Mathers, who researches U.S. population trends at the Population Reference Bureau. "That's one reason why people in the Midwest are leaving in large numbers, because they can’t just move to the next town—there is no next town. In areas out West, you’re relying on the city services for your survival, sometimes in harsh environments, so that will be much more difficult. By taking away these services, the government may save money but inadvertently destroy the glue that holds a community together--Robert Putnam’s social cohesion."

That seems to beg even bigger questions about the geography of future population centers (think Richard Florida). It seems clear that we're ushering in a new era of city planning, and there are plenty of visionaries out there pushing their ideas of how we will all organize ourselves in the future. But while there's tremendous excitement and conversation galore, there's still little consensus on a new, better model for towns. Plus, even if the recession is accelerating certain movements toward consolidation, public opinion hasn't quite followed; as a recent Pew survey showed, despite the influx of young singles into urban centers, more people would still rather live in small towns than in cities or densely populated suburbs. Getting from here to there--whatever "there" is--will be the hard part.

The Toothless Bond Vigilantes: When Treasury yields rose from a low of 2.1 percent to 3.5 percent last month, commentators thought it was a sign that "bond vigilantes" were pushing back against the U.S. government and its endless issuance of new debt. Not so, says Martin Wolf -- the rise in rates is actually a very good thing, and a sign that deflation fears are gone.

A Real Humdinger: As General Motors sheds its crappy assets, first on the chopping block is Hummer, maker of the gas-guzzling, military-caliber vehicle once favored by Paris Hilton and other celebs. Who's buying it? Why, China, of course! The idea of 1.3 billion people with access to an automobile that gets around 10 mpg can't bode well for the environment.

The Incredible Lula: When he was first elected in 2002, "the nation’s currency plummeted 60 percent, and its borrowing costs tripled to 24 percent." Now, despite the recession, his approval rating is 78 percent, higher even than Obama's, and the world's investors will be sad to see him go when his term ends next year. Not to worry -- whoever his successor may be, he's sure to continue Lula's sensible, centrist policies.

Your Taxpayer Dollars at Work: Felix Salmon points us to the new General Motors ad, which looks a lot like the old ones ("We're patriotic!") but with a new script, including lines like, "This is not about going out of business."

There are now lots of folks predicting that economic recovery may come in the shape of a W – that is, a rebound out of recession (soon) followed by another dip at some point in the next couple of years, before things finally stabilize. But the hows and whys of the W recovery are up for grabs—economists say it could be the result of inflation, or a commodities spike, or any number of other reasons. Today, I saw an interesting theory put forward by Eric Chaney, the chief economist of the AXA Group, one of the world’s largest insurers. Chaney used to write opinion columns for me when he was chief European economist for Morgan Stanley, and he’s a pretty smart guy. His take is that the second dip of the W may come from a bond market crisis, touched off by the huge amounts of debt that will be issued by governments all over the world in the coming months and years.

The numbers are truly astounding – the increase in net borrowing by rich countries between 2008 and 2010 will be around $2.5 trillion, or 4 percent of the world’s GDP. Emerging economies will need to borrow hundreds of billions more, of course. In his report Chaney asks, “Will lenders be ready to absorb all this paper at reasonable (for borrowers) prices? To put it bluntly, aren’t governments initializing a generalized Ponzi scheme a la Madoff? If not, how do we get out of the debt spiral?”

It’s a great question. In the short term, things don’t look too bad, because at the moment both consumers and companies are busy trimming their own balance sheets. But as the recovery takes off, and companies once again begin tapping markets for capital, they’ll be competing with governments. This will likely come at a time when the Fed and the ECB start unwinding their monetary stimulus. That, predicts Chaney, could lead to a remake of the 1994 bond crisis, with a large rise in yields, followed by a crash – but this time around, on a global basis. That brings us to the second dip of the W – which, if Chaney is right, could come around 2011. Hang onto your hats – and your wallets.

Does the DJIA Matter?: Amidst the cacophonous response to the General Motors, the Dow Jones company announced it was removing both Citigroup and General Motors from the Dow Jones Industrial Average, a weighted index of 30 leading stocks. The question, says, Felix Salmon, is who cares? The DJIA is chosen by the Wall Street Journal editorial board, for goodness sake. It's also completely unrepresentative (insurer AIG was replaced by food giant Kraft in September; Cisco gets GM's spot, for some unknowable reason) and weighted by stock price instead of market value. Dumb, dumb, dumb.

Still the One: Another high-ranking Chinese official comes out and says what we all know: the dollar isn't going away anytime soon. That's probably not much solace at the Treasury auctions that have been going so poorly recently.

Back to Basics: America is a nation of savers once again.

The Road to Bankruptcy: General Motors will follow Chrysler into bankruptcy this week. Check out the Financial Times' interactive graphic on the last decade of the company's history to see how it got here. Elsewhere in the salmon-pink pages, former Labor Secretary Robert Reich argues that what is bad for GM is bad for America.

Better Finance Through Natural Selection: How are the financial markets like elephant seals during mating season?

The 'Bond Vigilantes' Are Back: They're mad at the U.S. government, and wreaking havoc on U.S. Treasury auctions. Don't think you care? Well it affects everything from your mortgage to your bank interest rate.

Mr. Geithner Goes to Beijing: What should we expect from our Treasury Secretary's first trip to China. "Not much," says former IMF chief economist Simon Johnson.