Greenspan's irrational exuberance speech is making me think more about monetary policy, in particular with respect to inflation and deflation.

Inflation and deflation affect stored and borrowed money: they affect savers/lenders and borrowers. Inflation (especially unforseen inflation) helps borrowers at the expense of savers, allowing the borrower to repay the debt with money that's worth less. Deflation has the opposite effect: it makes the borrower repay the debt with money that's worth more.

After Japan's stock market and real estate market crashed, Japan entered a period of zero money supply growth or even deflation. The Bank of Japan's published interest rate is still hovering around zero.

Why won't the same thing happen in the U.S.? The stock market is thinking about crashing now. Real estate will be next, if the stock market does collapse to pre-1990 levels: it'll take longer because a margin call is immediate and a foreclosure takes months.

Although I've thought for a long time that deflation would then come to the U.S., as it did in the early years of the Great Depression (1930:-2.4%, 1931:-9.4%, 1932:-10.4% source). But now I think deflation is less likely -- at least as a deliberate act of monetary policy.

The United States is still a borrower of foreign capital, and it would be against the U.S.'s interests as a borrower to allow deflation of the U.S. dollar as long as foreign lenders are willing to lend us money in dollar-denominated notes. I believe Japan is a net lender of capital, so deflation is less serious there.

Expect to see this played out as rich vs. poor, whether inflation or deflation happens -- inflation "steals the savings of the poor", while deflation "breaks the back of the indebted poor".

It's clear: Israel should never have become a state in the first place.

Without statehood, there would be nobody to complain against in the U.N. We see the reaction of the international community when people without a state violate international law (combatants out of uniform, combatants wearing the enemy uniform, deliberate targeting of non-combatants): there's no reaction. The terrorists, Palestinian and otherwise, who commit these violations of international law, these war crimes, in the occupied territories and Israel, are not censured or blamed by the international community.

If Israel had never been founded -- if the state of Israel had not been declared -- if the Jewish people who live there were struggling to maintain their very existence against a more numerous and better-armed and better-funded foe just as they are today, but without the trappings of statehood -- then the Europeans and the liberals and the news media would be much more sympathetic, right?

Right?

After all, they're not acting on any anti-Jewish bias. Are they?

Here's an article by Arianna Huffington about financial scandals. Huffington, you will recall, is the former wife of multimillionaire Michael Huffington, former candidate for the Senate in California.

Among the gems of self-contradiction in this piece are:

-- raillery against "corporations", while the whole piece is copyright to "Christabella, Inc."

-- comparison of the distinctions between "right and left or black and white" to the distinction between an asset and a liability

Okay, Arianna, here's a quick refresher course: Money is not real. Accounting is not real. Accounting models of financial systems are the best way we have of understanding those systems, but they're still not real.

Oh yes, and the IRS and SEC use different rules, so it's perfectly reasonable for a clever person to be able to find something which is an asset in one set of books and a liability in the other. (Case in point: future employee stock option payments.) It may well be dishonest, but I'm sure it's technically legal -- and the law is technical.

I don't use accounting tricks like that in my small business because I can't be bothered to find the accountant who'll teach me how to do them -- and I probably couldn't afford to pay that accountant, anyway. How about you, Arianna -- can you say you honestly stand behind everything that's on the books of Christabella, Inc.? Do you even know?

Israel's foreign ministry has a propaganda page with some flash presentations. The propaganda is viscerally unconvincing, and appeals to the viewer at the level of reason. Don't the Israelis get it? Propaganda is supposed to convince irrationally.

On the other hand, it's not like the base message -- that Palestinian "militants" intentionally murder Jewish children and other non-combatants -- gets through. Why not try this strange appeal-to-reason propaganda, on the off chance it will?