Dem race is finally over.

Well the end is in sight for the dems, happily. Hillary has been on her best behavior recently, doing a whole lot more criticizing of McCain than Obama. She knows he's won, and for the first time in a long time is doing the party some real good. Amazingly, she seems to badly want the # 2 slot. The Clintons are savvy political animals and they think Obama will win. Being a sitting VP isn't the worlds worst place to run for President. Just ask President Gore. Oh wait....

First, a look back. I have been busier and not posting. Had I posted after Rev. Wright's more recent eruption, I would have predicted that it would measurably eat into Obama's support and favored Hill. I would probably have predicted that the supers would stop endorsing and play more a wait and see. And I would have been WRONG. Nothing has changed the view of dem primary voters since late February. Nothing. ALL the races have gone as the experts have predicted. Hill crushes in West Va and Kentucky? Check. Obama wins NC and Oregon? Check. And so on.

Anyway, Hill wants to be Vice. If you're there, something may turn up. Or she'd have to wait 8 years. She's a healthy 60, and would likely be more than up to it at 68 if she sets her mind to it.

Anyway, the race is done. And my (modest) fan club is clamoring for my views on who Obama will pick as VP.

First, he doesn't actually "pick" the VP nominee, the delegates at the convention do. Typically this is a formality. But there's been a lot of speculation recently about the Clintons lobbying Obama supers to promise to pick Hill as Vice. Now if I were a super that owed the Clintons a favor, and went against them and went with Obama and they called me again and asked me to jam Clinton down Obama's throat, that would be a very appealing request. I would almost certainly agree to do it. I could win back favor with the Clintons and the Clintonites without really pissing off anyone.

Having said that, I'll work from the bottom.

America has about 300 million people.

My 300 millionth choice for Vice is Dick Cheney.

My 300 millionth and first choice, just one person BEHIND Dick Cheney, is Hillary. I just want her and Bill to GO AWAY. Her campaign has enraged me. She has violated what SHOULD be the first rule of politics-- what I call the Frank Sinatra rule. Do it MY WAY! To thine own self be true. She didn't do it her way. As Andrew and I put it, "She did it Dick Morris' way-- triangulate, triangulate, triangulate -- and never get out in front of the people by suggesting a smart solution that isn't a consensus opinion." She pretended to be anti-free trade, she supported a gas tax holiday, she attacked Obama hard personally and pretended to have policy differences. Just what difficult truths did she tell the democratic party in this endlessly long and monumentally expensive race? That we need nuclear power to transition away from oil? That fighting for national health care will require just HUGE political battles with insurance companies? That it will cost MORE money to fix the broken military W is handing off? Not so much. (Though she did, to her great credit, sound a very hawkish tone on Iran).

As an added bonus, no extra charge, she and her darling hubby injected race wherever possible. "He's black, HE'S BLACK," they whispered, said, and once in a while screamed. Yes, Hillary, he is. Thanks for that.

Although I don't take back my view that she'd make the best president of the dem candidates, she ran, in my opinion, a largely dishonorable campaign. I just want her to go away. If we need to make her Senate Majority Leader for life as a nice consolation prize to get her to go away now, fine. God knows she's a big improvement over Harry Reid, who I suspect may lose his seat anyway in 2010 when he's up.

Politically, I think she does the ticket harm not good (though probably not much harm). I think having BOTH Clintons around will get in Obama's way, I think she repels some voters, does bring some others, and besides, Vice Presidential choices are badly overrated. Lastly, Obama's glaring weakness is in national security matters, and well-crafted images to the contrary, Hillary's experience here, while deeper than his (whose isn't?) is not real deep. She didn't serve in the military, hasn't held a military related position, and hasn't been a longtime national leader on national security issues, as McCain has, as Sam Nunn did once upon a time, as Joe Biden has.

I just don't want her around. My first choice, pending a detailed interview and background check, is Jim Webb, Senator VA. He fought in Vietnam, was Navy Secretary under REAGAN, switched parties a while back and won a Senate seat from Virginia as a democrat. His being from a swing state is a small plus (yes, Virginia is seriously in play with Obama as the nominee), but MUCH more important is that he's a straight shooter, funny, engaging, a populist streak, and is up to the job of Commander in Chief.

My second choice, *sigh* is Senator Joe Biden. Dull as dishwater except when he's funny, and I don't always agree, but a democratic leader on national security for 2 decades.

My 2 A choice is Bill Richardson. Good national security profile, but doesn't look the part (short, very chubby). Americans are ignorant, and base a lot of their views on images, and he doesn't LOOK the part. But he IS the part, though he can be more than a bit odd in what he says. Being hispanic is very nice as well. Hispanic voters have been left cold by Obama (there are often tensions between black and Hispanic politicians in big cities), and McCain is even better placed than Bush was to make a real run at them, because he has sensible views on immigration, which he held reasonably fast to despite enormous pressure to bend.

Ok, my REAL first choice, the potential game-changer, the way out of the box choice is Al Gore. Sure its pathetic to be Vice President AGAIN. But he's got the experience, he can help on security issues, he has the sex appeal of an Oscar AND a Nobel. Suffice to say he'd be a HUUUUGGEEEEE plus. I doubt seriously he'd accept the offer, but if I were Obama I'd sure as heck offer.

These are my HOPES. If I had to PREDICT, I would be at this point pretty surprised if HILLARY wasn't the V.P. nominee. She seems to really want it, she got a ton of votes in the primaries, and can make life absolutely miserable for Obama if she chooses to take her marbles and go home. If she's on the ticket, she and Bill will work hard for it. If she isn't they won't, and may even do it active harm. Not a pretty picture, but then the Clintons aren't pretty people. Happily, she'd make a useful Vice, and if something happened to Obama, she'd be instantly ready to step into the Big Chair.

The direction of interest rates in the coming months.

Well, onto the next few fed meetings. I told Fed Chairman Bernanke that I was opposed to his last interest rate cut, and dissented. He told me to shut and stop whining-- that he had enacted my plan WHOLESALE, and I was quibbling. Well he was right, of course. But he did promise me that the fed was done. "We're followers Dan. We followed right where the markets led us, and now we're going to continue to follow. They are the people, we MUST FOLLOW THEM!" He cried, as he leaned back in his $4,000 leather chair, sipping a bottle of imported spring water. "Well ok Ben," I said, sipping my Diet Pepsi (whiskey is so 1985). "But what's next? We're all going on interest rate vacation right? You and the boys that monitor the financial markets are pulling all nighters, but you sent the FOMC crowd home for the Summer, right?" "Yup. You win again, Dan." "Ok Ben, but please tell me we're also done injecting money, making new guarantees, doing more feel good?" "Only if we fucking have to. We've done ENOUGH! The destruction of the dollar is giving me the screaming heebie jeebies. I aint going down in history as the Fed Chairman who turned the dollar into toilet paper!"

"FANTASTIC BEN! You're heading right where I want to go. I AM SO IN LOVE WITH YOU BEN!" "Um, Daniel, you really scare me sometimes."

So that's where we are. The FOMC is on vacation. The Good Lord himself couldn't move interest rates for the next several months. The next move is very likely up, sometime very late this year or more likely early next year, barring complete abject disaster in the financial markets. At my urging, Ben has widely signalled to the markets that the FOMC is in fact on vacation. "Ok, Ben," I asked, "may I now provide you with the plan for getting the dollar back to being worth something again? When a simple sandwich on a Paris street corner costs literally $18, something is badly wrong." "Shoot."

"Well Ben, my plan for the next 6-9 months is benign neglect. Its very unfortunate, but we can't just raise rates to defend the dollar 28 nanoseconds after we cut them to the floor. We'll look like the gang that can't shoot straight, both to the stock and currency markets. It'd be a disaster, worse for the dollar by far than benign neglect." "Duh," he eloquently replied. "But after we're reasonably sure we're out of the financial markets woods, and we can clearly see the economy rebounding, it'll be time to take some money out of the system. First we can do so via open market operations, just sell some bonds, and seriously slow the growth in the money supply the old fashioned way. The markets will get the hint after a few weeks, that Dollar Sheriff Ben has replaced Panic Ben, and that help is on the way for the beleaguered greenback."

"Next, a few short months later, an initial 50 basis point rate hike. The Federal Funds Rate will still be real low; at 2.5% rates will be WAY below what will be the nominal GDP growth at that time (figure 4.5% inflation and 2% growth, so 6.5% nominal GDP growth and 2.5 % rates-- not exactly restrictive policy!) Then rates will have to go up as fast as they went down, so we can race back towards a slightly stimulative or neutral real rate. So 2009 will, hopefully, involve a series of sharp rate increases."

"I note, Ben, that these rate hikes will likely devastate the equity markets in the very short run, but the sagging dollar ought to spring back to life as the real economy should be able to absorb these blows by then, and of course interest rate differentials between the US and the rest of the world will level out." If the real economy holds up, and the dollar rebounds, the equity markets will of course take care of themselves."

"Well done Daniel my boy. My thoughts exactly. I would add that I would expect that by the time we start frog-marching interest rates north, late in 2008 or early in 2009, that the Euros will be about ready to cry uncle and cut theirs a bit." The shock to the currency markets will be profound. All of their assumptions have been based on the Euros' heads in the sand while we cut rates to the floor. When BOTH of those assumptions go out the window at the same time (with or without coordination)-- well let's just say I'd sell Euros and buy dollars ahead of all this. Oh, and between you, me and the wall, hopefully Obama will have won the presidency and the markets will realize that it is no longer open season on the dollar from the administration. Hopefully Bob Rubin will pull Obama aside and tell him what's what. Lord knows someone has to." "Hey Ben, what happens if god forbid McCain wins?" "Don't even think it. I talked to him by phone earlier this year. He may not be dead serious about even lower taxes, but he's a lost cause on actually raising them. And the spending cuts he's talking about-- well 'puny' about covers it. I think Obama's higher taxes and slightly higher spending are BETTER for the dollar than McCain's Bush light policies. But if you put that up on your fucking blog I'll personally hang you by your thumbs!"