American revolution: the fall of Wall Street and the rise of Barack Obama (Part 2).

Obama, however, was the candidate who was most obviously relishing being able to relax, to throw off the "dull" mantle and flash his megawatt smile, missing from all the debates: "John McCain is onto something. There was a point in my life when I started palling around with a pretty ugly crowd, I've got to be honest. These guys were serious deadbeats; they were lowlifes; they were unrepentant no-good punks. That's right: I've been a member of the United States Senate."

They poked fun at themselves and each other. McCain made light of his blunder in calling Obama "that one" during the second debate. "He doesn't mind at all," Mr McCain said. "In fact, he even has a pet name for me: George Bush." Obama followed up by telling the crowd that his first name was actually Swahili for "that one."

Obama dispatched Sarah Palin by deadpanning, "I do love the Waldorf-Astoria. You know, I hear that from the doorstep you can see all the way to the Russian Tea Room." But my favourite Obama joke of the evening was when he said, "There is no other crowd in America that I'd rather be palling around with right now. It is often said that I share the politics of Alfred E. Smith and the ears of Alfred E. Newman." Paying homage to two great Americans.

LIBOR rates, an important index of banks' willingness to lend to each other, are contracting. Efforts continue to get a clearing house in place for the US$55 trillion of credit-default swaps to bring transparency to the market--a measure some authorities and thoughtful market participants have been trying to accomplish for several years. Initially intended to be a form of insurance for securities, credit-default swaps devolved at many banks into undisguised gambles. That is, the buyers and sellers of these contracts were neither the lender nor the borrower. As Barbara Rockefeller notes, "It's a big bookie operation like a sports book, and the Fed is annoyed that such frivolity is hanging like a sword over our heads."

Meanwhile, in the New York Times Warren Buffett loses some of his lustre for me by opining that people shouldn't feel comfortable putting their money in cash. "They have opted for a terrible long-term asset," he scolds, "one that pays virtually nothing and is certain to depreciate in value ... Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky's advice: 'I skate to where the puck is going to be, not to where it has been.'" Terrible? Buffett might feel comfortable taking his money out of Treasuries and buying US stocks, but he's also the richest man in the United States. He can afford to win some, lose some. Also, when I worked on Wall Street, Wayne Gretsky skating to the puck was a rah-rah staple of speeches. A line so hoary that it could stand up by itself, so over-used that it has less value than a Lehman CDO.

Saturday, 18 October

I talk with a friend, Desmond, about my assumption that investment bankers had been made stupid by their arrogance. Desmond replies that arrogance is stupidity. Long ago, he worked as a bond trader. After a few months on the job, he said to his boss, "These people are really stupid." Hardly the first person to make this observation of bond traders, who occupy the bottom of the Wall Street heap. "Button your lip," said his boss. "If they were smart we wouldn't make any money."

Desmond later sends me an email with some lines from the beginning of Joseph Conrad's Victory: "The world of finance is a mysterious world in which, incredible as the fact may appear, evaporation precedes liquidation. First the capital evaporates, and then the company goes into liquidation. These are very unnatural physics ..."

The subject of bankers and stupidity was parsed with vigour by hedgefund manager Andrew Lahde in a letter to his investors, leaked to a wider audience today. He is closing shop--a tremendously lucrative shop that had an 870 per cent gain last year by betting on the subprime mortgage collapse. The letter is worth posting in full:

   Today I write not to gloat. Given the pain that nearly everyone is
   experiencing, that would be entirely inappropriate. Nor am I
   writing to make further predictions, as most of my forecasts in
   previous letters have unfolded or are in the process of unfolding.
   Instead, I am writing to say goodbye.

   Recently, on the front page of Section C of the Wall Street
   Journal, a hedge fund manager who was also closing up shop (a
   $300 million fund) was quoted as saying, "What I have learned
   about the hedge fund business is that I hate it." I could not
   agree more with that statement. I was in this game for the money.
   The low-hanging fruit, i.e. idiots whose parents paid for prep
   school, Yale, and then the Harvard MBA, was there for the taking.
   These people who were (often) truly not worthy of the education
   they received (or supposedly received) rose to the top of
   companies such as AIG, Bear Stearns and Lehman Brothers and all
   levels of our government. All of this behavior supporting the
   Aristocracy only ended up making it easier for me to find people
   stupid enough to take the other side
   of my trades. God bless America.

   There are far too many people for me to sincerely thank for my
   success. However, I do not want to sound like a Hollywood actor
   accepting an award. The money was reward enough. Furthermore,
   the endless list of those deserving thanks know who they are.

   I will no longer manage money for other people or institutions.
   I have enough of my own wealth to manage. Some people, who
   think they have arrived at a reasonable estimate of my net worth,
   might be surprised that I would call it quits with such a small
   war chest. That is fine; I am content with my rewards. Moreover,
   I will let others try to amass nine, ten or eleven figure net
   worths. Meanwhile, their lives suck. Appointments back to back,
   booked solid for the next three months, they look forward to their
   two week vacation in January during which they will likely be
   glued to their Blackberries or other such devices. What is the
   point? They will all be forgotten in fifty years anyway. Steve
   Balmer, Steven Cohen, and Larry Ellison will all be forgotten.
   I do not understand the legacy thing. Nearly everyone will be
   forgotten. Give up on leaving your mark. Throw the Blackberry
   away and enjoy life.

   So this is it. With all due respect, I am dropping out. Please do
   not expect any type of reply to emails or voicemails within normal
   time frames or at all. Andy Springer and his company will be
   handling the dissolution of the fund. And don't worry about my
   employees, they were always employed by Mr. Springer's company
   and only one (who has been well-rewarded) will lose his job.

   I have no interest in any deals in which anyone would like me to
   participate. I truly do not have a strong opinion about any market
   right now, other than to say that things will continue to get
   worse for some time, probably years. I am content sitting on the
   sidelines and waiting. After all, sitting and waiting is how we
   made money from the subprime debacle. I now have time to repair
   my health, which was destroyed by the stress I layered onto
   myself over the past two years, as well as my entire life--where
   I had to compete for spaces in universities and graduate schools,
   jobs and assets under management--with those who had all the
   advantages (rich parents) that I did not. May meritocracy be part
   of a new form of government, which needs to be established.

   On the issue of the US Government, I would like to make a modest
   proposal. First, I point out the obvious flaws, whereby
   legislation was repeatedly brought forth to Congress over the past
   eight years, which would have reined in the predatory lending
   practices of now mostly defunct institutions. These institutions
   regularly filled the coffers of both parties in return for voting
   down all of this legislation designed to protect the common
   citizen. This is an outrage, yet no one seems to know or care
   about it. Since Thomas Jefferson and Adam Smith passed, I would
   argue that there has been a dearth of worthy philosophers in this
   country, at least ones focused on improving government.
   Capitalism worked for two hundred years, but times change, and
   systems become corrupt. George Soros, a man of staggering wealth,
   has stated that he would like to be remembered as a philosopher.
   My suggestion is that this great man start and sponsor a forum
   for great minds to come together to create a new system of
   government that truly represents the common man's interest,
   while at the same time creating rewards great enough to attract
   the best and brightest minds to serve in government roles without
   having to rely on corruption to further their interests or
   lifestyles. This forum could be similar to the one used to create
   the operating system, Linux, which competes with Microsoft's
   near monopoly. I believe there is an answer, but for now the
   system is clearly broken.

   Lastly, while I still have an audience, I would like to bring
   Attention to an alternative food and energy source. You won't see
   It included in BP's "Feel good. We are working on sustainable
   solutions" television commercials, nor is it mentioned in ADM's
   similar commercials. But hemp has been used for at least 5,000
   years for cloth and food, as well as just about everything that
   is produced from petroleum products. Hemp is not marijuana and
   vice versa. Hemp is the male plant and it grows like a weed, hence
   the slang term. The original American flag was made of hemp fiber
   and our Constitution was printed on paper made of hemp. It was
   used as recently as World War II by the US Government, and then
   promptly made illegal after the war was won. At a time when
   rhetoric is flying about becoming more self-sufficient in terms
   of energy, why is it illegal to grow this plant in this country?
   Ah, the female. The evil female plant--marijuana. It gets you
   high, it makes you laugh, it does not produce a hangover. Unlike
   alcohol, it does not result in bar fights or wife beating. So, why
   is this innocuous plant illegal? Is it a gateway drug? No, that
   would be alcohol, which is so heavily advertised in this country.
   My only conclusion as to why it is illegal is that Corporate
   America, which owns Congress, would rather sell you Paxil, Zoloft,
   Xanax and other additive drugs than allow you to grow a plant in
   your home without some of the profits going into their coffers.
   This policy is ludicrous. It has surely contributed to our
   dependency on foreign energy sources. Our policies have other
   countries literally laughing at our stupidity, most notably
   Canada, as well as several European nations (both Eastern and
   Western). You would not know this by paying attention
   to US media sources though, as they tend not to elaborate on
   who is laughing at the United States this week. Please people,
   let's stop the rhetoric and start thinking about how we can truly
   become self-sufficient.

   With that I say good-bye and good luck.

   All the best,

   Andrew Lahde

Good for you, Mr Andrew Lahde! May you enjoy your spliffs! His letter is a reminder that there is always a counterparty, always someone on the other side of financial bets. Always someone making money by the boatload.

The stores are mostly empty, even the popular big-box chains near me on Broadway. It's as if there's been a citywide anthrax scare. Pottery Barn tried to attract Saturday-morning shoppers by the primitive means of placing a blackboard propped on an easel outside its door to advertise lessons on "how to decorate a table and dress a bed." These activities seem like relics from some long-ago era, like croquet and charades.

Robert Skidelsky, author of a critically acclaimed biography of John Maynard Keynes, notes the boomlet in financial terms: "A whole new vocabulary has spread from board tables to kitchen tables. Superannuated whiz kids planting cabbages to offset their newly straitened means can blame their troubles on collateralized debt obligations, special investment vehicles, credit default swaps. Subprime mortgage holders find themselves censured for a new and virulent disease called toxic debt." I can testify to that. When I was doing publicity for my novel Moral Hazard in 2002, I was forever explaining the term. No need for that now.

Keynes thought that professional investment is like "'a game of Snap, of Old Maid, of Musical Chairs,' whose object is to pass on the Old Maid--the toxic debt--to one's neighbor before the music stops," writes Skidelsky. "What makes the game toxic is not greed, which is universal, but uncertainty masquerading as certainty."

Skidelsky reminds us that Keynes's aphorisms, "which seem so apposite today, were for years dismissed with a pitying smile as the product of a primitive state of economic thinking that had been rendered obsolete by powerful desktop computers and Ph.D. math unavailable to economists of Keynes's generation ... We know now that we know very little."

Sunday, 19 October

On Meet the Press, General Colin Powell comes out in support of Obama with an eloquence almost equal to Obama's. With the polls showing Obama to have a double-digit lead and his rallies in stout Republican states attracting some of the biggest crowds of the campaign, the talking heads give the election to Obama, with the external-event caveat. An outlier. Conservative commentator Andrew Sullivan thinks that the extraordinary get-out-the-vote campaign, which has swollen the numbers of Democrats registered to vote, means that Obama will win by an even greater margin than the polls say. And, oh yes, Obama's presidency will be the dullest presidency ever.

For their part, the Obama campaign managers are being "superstitious." They're not about to crow. Only two words, they say, are needed: New Hampshire. That's where the pollsters got it wrong in the primaries, giving it to Obama before Hillary Clinton won. When I mention this to Frank, an ex-banker friend who talks regularly with an Obama staffer, he tells me that word has gone out to everyone in the field: "Don't get cocky." The discipline of the campaign on display again.

They are right. No one I know is feeling confident. Everyone I talk to from other countries thinks it will be a shoo-in, but they don't live here. After all, it's only been forty-three years since the National Voting Act, when restrictions, such as literacy requirements, that had kept black people from voting, were lifted. And the unexpected has happened all year long. The unexpected need not be external, of course, given the priming of the Far Right by Sarah Palin.

Another prominent Republican has also endorsed Obama: Christopher Buckley, author of the uproarious Thank You for Smoking and the son of the dean of conservatives, the late William Buckley, who came to resemble a lizard as he aged, complete with scales and flickering tongue. An elitist, malevolent lizard: Bill Buckley dripped Park Avenue contempt and dismissed opponents with scorching blasts of erudition. For his heresy, Christopher Buckley was immediately removed from the masthead at the National Review, the magazine his father founded. "The thought of Sarah Palin as president gives me acid reflux," says Buckley. He adds that his father spent his life trying to separate "the Right from the kooks," which led me to amuse myself by imagining a meeting between Bill Buckley and Sarah Palin. I think Bill would have kept the lascivious drooling in check, unlike Henry Kissinger when he had a tete-a-tete with La Palin.

On The Daily Show, Buckley is asked by Jon Stewart whether he will return to the National Review fold after the election. He answers by paraphrasing Reagan: "I didn't leave the Republican Party. The Republican Party left me." Buckley hopes that there will be some post-election soul-searching in his party. He pauses--his speech cadences are exactly like his father's--and then adds cheerfully, "There probably won't be."

We are told today that the FBI doesn't have enough agents to investigate criminal financial wrong-doing. Agents were re-assigned to terrorist programs, but the major reason is--surprise, surprise--cutbacks, which "have left the bureau seriously exposed in investigating areas like white-collar crime." The plan is to re-assign several hundred agents, but many inside and outside the Justice Department don't think that will be enough. A shortage of G-men.

Monday, 20 October

Ben Bernanke appears before a congressional committee in the morning and gives the nod to another stimulus package like the one earlier in the year. Along with giving the banks trillions--the amount keeps escalating, we left billions behind last week--the idea is to give taxpayers a couple of hundred bucks each, which we will rush out and spend, boosting the economy. Unlikely given the black holes in household budgets.

Enter economist Anna Schwartz, now ninety-two years old and able to remember the Great Depression, not just study it, as Bernanke has done. Schwartz co-authored with Milton Friedman A Monetary History of the United States, which Bernanke acknowledges as the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression.

In an interview in the Wall Street Journal, Schwartz argues that the Fed has got it all wrong. According to her, they've gone about it as if there was a shortage of liquidity when the real problem is uncertainty "that the balance sheets of financial firms are credible." The bankers don't trust each other.

Even though the Fed has flooded the credit markets with cash, they remain constipated "because banks don't know who is still solvent and who is not." The problem: derivatives that can't be sold because they can't be valued. Schwartz thought that Hank Paulson's original proposal to buy these assets from the banks was "a step in the right direction," but if the assets were priced at today's levels a number of banks would be insolvent. In shifting from buying bank assets to recapitalising them directly, as Paulson and the Treasury did on Monday, they shifted from trying to save the banking system to saving banks.

Rather, says Schwartz, with welcome bluntness, "firms that made wrong decisions should fail ... Everything works much better when wrong decisions are punished and good decisions make you rich." The trouble is, "that's not the way the world has been going in recent years." The esteemed Anna Schwartz is a moral-hazard fundamentalist.

"It takes real guts to let a large, powerful institution go down, but the alternative--the current credit freeze--is worse," argues Schwartz, who still reports for work at the National Bureau of Economic Research in New York, where she has been employed since 1941. "I think if you have some principles and know what you're doing, the market responds. They see that you have some structure to your actions, that it isn't just ad hoc--you'll do this today but you'll do something different tomorrow." When the authorities drew a line with Lehman Brothers after saving other institutions, they looked erratic, not principled.

She lays the blame for the crisis firmly with Alan Greenspan and his expansive monetary policy: "If you investigate individually the manias that the market has so dubbed over the years, in every case, it was expansive monetary policy that generated the boom in an asset."

The former Fed chairman is busily absolving himself of any responsibility by saying that he had to have an expansive monetary policy or the market would have been "very much displeased." Whatever the market might think, Schwartz contends, the longer the boom, the bigger and more painful the bust: "In general, it's easier for a central bank to be accommodative, to be loose, to be promoting conditions that make everybody feel that things are going well."

Deliciously--if you find such things delicious--Anna Schwartz remembers Ben Bernanke, back when he was the New York Federal Reserve Board governor, declaring in a speech in honour of Milton Friedman's ninetieth birthday, "I would like to say to Milton and Anna, regarding the Great Depression: you're right, we did it. We're very sorry. But thanks to you, we won't do it again." But they are doing it again, Schwartz ruefully acknowledges. Her verdict on the present Fed leadership: "They have not really done their job."

Listen up, boys: "Everything works much better when wrong decisions are punished and good decisions make you rich."

Brooksley Born and Anna Schwartz--my heroes.

Tuesday, 21 October

Credit is supposedly beginning to flow. If you say so. (In New York, whenever someone says something self-evidently wrong and you want to signal polite or amused disagreement, you reply, "If you say so.")

The drumbeat from the McCain campaign is nonsense about the "real" America. Needless to say, New York is not the "real" America. A Republican congresswoman, Michele Bachmann, called last week for an enquiry to uncover which of her colleagues is anti-American. In response, donations have been pouring into her opponent's campaign coffers, US$1 million, more than he's received in the entire year. The congresswoman has denied having said it, transcript to the contrary, making herself even more of a laughing stock. All the same, McCarthy-era language is unsettling.

During the day I compulsively switch from the cable news channel MSNBC, to the financial channel CNBC, to the point that I think that I'm losing it. I'm hardly alone in this behaviour.

At the hairdresser, I hear an Upper East Side woman says to Mr Kim, the Cambodian proprietor, "I'm scared, so scared, that Obama will lose." Mr Kim isn't scared at all. In his view, neither party will do anything for him. He's furious, though, really steamed at our billionaire mayor, Michael Bloomberg, who wants to suspend term limits because of the economic crisis and run for four more years. On the whole, Bloomberg has been an effective mayor, but this is "no fair." Slippery slope.

Frank, my ex-banker friend, relates to me a conversation he had with one of New York's top real-estate developers. "If the real-estate slump is a baseball game with nine innings, what inning are we in now?" he asked. The developer replied, "The second inning." Out-and-out gloom and doom from a level-headed, pragmatic businessman.

Across from my apartment, a svelte condo building is rising. I've enjoyed watching it go up because the site is run with extraordinary precision, comforting given the number of cranes that have toppled and killed people in the rush to put up condos. The two cranes for this building are whoppers; they reach higher than my 32nd-floor windows. Grasshoppers out of a science-fiction movie. And it's science fiction I think of when I look out at the city these days, the Hudson River on one side, Central Park on the other, the mass of buildings in between turned into a patchwork by the ever-changing autumn light.

Who will live in the new building if we are only in the second inning? Thousands upon thousands fired on Wall Street, and thousands upon thousands who cater to them, likewise. Rich Russians, Chinese and Indians, once thought to want always to buy apartments here because the US is more stable than their own countries, will stay at home. As well, overseas companies will cancel apartment leases. And then there is the commercial property market. I think not so much of the movie Blade Runner as of Dhalgren, a novel by Samuel R. Delany in which people eke out a bleak, anarchic existence in a city where an unknown catastrophe has occurred. Delany probably didn't have a financial catastrophe in mind, but the end result could be the same. His novel begins: to wound the autumnal city. / So howled out for the world to give him a name. / The in-dark answered with wind.

Wednesday, 22 October

Trying to shake my bomb-shelter state of mind, I take a long walk around the neighbourhood with Sophie. Dogs slow you down, make you pay attention to your world, instead of striding, lost in thought. One block over, in Damrosch Park at Lincoln Center, the Big Apple Circus has set up its tents for its New York season. A giant banner for Doctor Atomic strains in the wind on the front of the Met Opera. In the next block a huge party tent half a block long is being put in place, complete with multiple a/c units and stairs. Erected for one-night fundraising events, these tents, the money and energy expended in erecting them, have always bothered me. Can't they find a bricks-and-mortar hall in which to eat their filet mignon and write cheques?

It's autumn, already cold. The lobby of my building has filled with leaves, which have somehow gusted by two sets of automatic doors. Sophie is invigorated. She puts her head into the wind, ploughs a path. Soon, though, when the temperature drops to a level known only to her, she will pee and immediately turn tail and beetle inside.

Back in the apartment, I settle down to read Barbara Rockefeller's FX newsletter. Today, she is echoing Andrew Lahde and Anna Schwartz but draws back from out-and-out condemnation. Not just banks but whole countries are being propped up:

   To keep a grip on your perspective of rapidly unfolding events
   today, keep in mind two words--trust and contraction. The banks
   have lost trust in one another, their judgment on investments,
   their ability to judge credit risk of non-banks, and everything
   else, including whether the sun will rise in the East. As Paulson
   says (ruefully), we need the banks, even if they are a bunch of
   second-raters who behave badly. Having worked at banks for twenty
   years, we affirm that 99 per cent of bankers are second-raters and
   not people you would invite to dinner at your house. That they have
   lost trust in one another is in large measure what the
   psychologists call projection--they know they are second-rate and
   think the others must be, too. You can't force trust (any more than
   you can enforce morality) and therefore we have to wait for
   hysteria to die down under the firm hand of the Treasury and Fed.
   Nobody likes having government involved, but honestly, it does seem
   justifiable now. Think of the Treasury and Fed as responsible adult
   Girl Scout leaders taking care of 11-year-olds in the woods. No,
   that's not a monster, just an owl and owls do live in the woods,
   girls.

If you say so, Barbara.

The market tanks again. The VIX is back in the seventies. The system really is cannibalising itself.

Thursday, 23 October

In the two weeks before the US presidential elections, the percentage difference in the polls always narrows. In congressional races between black and white candidates, it really narrows. How does that happen? Perhaps because of mailers such as the one the Republican National Committee has put out. On the front of the mailer: "Terrorists don't care who they hurt." Inside: "Obama: Not who you think he is" and the usual guff about his past "associates." Vile, viler, vilest.

Joe Sixpack and Jane Winebox are learning that Sarah Palin has spent US$150,000 on clothes to kit out her and her family for the campaign trail at posh department stores like Neiman Marcus and Saks Fifth Avenue. Comforting earth tones for the family, challenging red patent-leather stilettos for Sarah. Naughty Monkey no longer good enough for her? Freebies are an Alaskan tradition: witness the trial of long-time Alaskan powerbroker Senator Ted Stevens, who claims that he was only storing the furniture and exercise equipment given to him by contractors and donors. In New York's bright, guilty world, a $150,000 budget for clothes--on the paltry side. The campaign will donate the clothes to charity after 4 November. If they say so.

AIG is freezing ex-CEO Martin Sullivan's US$19-million severance package, along with approximately $600 million in bonus money for other executives. That's Martin Sullivan of the mahogany complexion. Only freezing it, mind you, and the directors only took the measure because Andrew Cuomo, the state attorney-general, leaned on them. Actually, he threatened the company with legal action, calling the proposed severance "a fraudulent conveyance." The Fed has attached no strings to the US$122.8-billion credit line extended to AIG, which has now drawn $82.9 billion of that sum, all of it to back their side of the credit-default swaps made by the Financial Products Unit. That unit is no longer in existence, assures the new CEO, Edward Liddy, brought in by the Fed. AIG is out of the cold dogshit line of business. Good to hear it!

I check out the huge party tent. Because the tent is on raised land, six sets of stairs have been installed on the street side. Dry-cleaning racks filled with masses of purple and khaki jackets for the waiting staff stand on the pavement. Next to the tent, a large banner advertising the Baron Funds. An investor conference. I hope Baron Funds is better at judging market timing than it is conference timing. Baron Funds specialises in closed-end funds: limited investors, can't get your money back until the fund is liquidated. So how are they doing in the current market? I found this in the Washington Post: "A glimpse at the yields of some closed-end bond funds will make your jaw drop. Some of the figures, which are based on the previous 12 months' distributions, top 50 per cent. Throw in the fact that the shares of many of these funds sell for well below the value of the funds' underlying assets, and there seems to be an abundance of screaming buys. Screaming is the operative word here--as in riding that crack-fueled, could-jump-the-tracks-anytime roller coaster." Translation: if you have plenty of money, jump into a fund that has closed-end funds, but be prepared for a heart-in-mouth ride.

At a congressional hearing today, Alan Greenspan, a.k.a the Oracle, expressed "shocked disbelief" at the credit crisis and said he was "partially" responsible because he did not advocate regulation of derivatives. In his usual orotund speaking manner, he confessed to finding a flaw in his ideology: he'd trusted banks to have a stake in their own survival, to be "self-interested" in serving their shareholders. Anyone who has been anywhere near bankers knows that the behaviour of many of them is indeed dictated by self-interest: "I'll be long gone when the shit hits the fan." Greenspan's partial apology, even one through gritted teeth, is better than none at all. Those of us who've always thought Greenspan an enabling ass can take no pleasure in his mea culpa, given the havoc he's wrought.

Greenspan qualified his apology by saying that bad data had been fed into the financial models. Bad data? The long-known flaw in computer modelling is that it can only look backward, not forward, because such modelling can't take into account the unpredictability of human behaviour. Emotion--a critical market engine. The topper of Greenspan's testimony: he still doesn't think much regulation will be required because the activity of the banks will be "restrained" for some time because of the fall-out from the credit crisis.

Laissez-faire-ists--always finding an angle. My favourite excuse currently coming from bankers is that regulations are too complex for them to follow. First, they hid behind the complexity of structured finance. Greenspan himself claimed that the dot-com and housing bubbles were too complex for him to understand. Banking CEOs followed suit: derivatives were too complex for them to understand. The math certainly can be incredibly complex, but the principles are easy to understand. And if a unit in a bank is minting money, it behoves a CEO and his board to take a gander, figure out how the money is being made, the risk involved, not throw up their hands and say, "Too complex for us!" Whenever bankers use complexity to fend off inquiry, shoot 'em.

Asked on PBS's McNeil-Lehrer NewsHour whether Greenspan's legacy was affected, Alice Rivlin, respected economist and a former governor at the Fed, graciously said she had enjoyed working with him and thought he was extremely smart but, alack, driven by ideology. That would be Ayn Rand free-market ideology. As a result, Rivlin continued, "he stood in the way of modernising financial regulation," which just about sums up the Oracle's legacy.

One of my best pals, Sue, calls. She can't tear herself away from MSNBC either. She's hooked on the Huffington Post. "I'm all over it," she says. I tell her about the New York Observer's headline: "The World Serious. New York Is Plowing Its Anxiety Into The Nail-Biter That Has Replaced October Baseball." To relieve our nail-biting, she's bought tickets to a performance by Don Rickles, one of the great "insult" comics. Eighty-two years old--overweight, unsteady on his pins, pigeon walk--he's had a long career because he follows his insults--everyone gets zapped, regardless of gender, sexual orientation and ethnicity, risky when he started--with a sweet, disarming smile. He was a member of Frank Sinatra's Rat Pack. One joke involves Rickles at the Fontainebleau Hotel in Miami Beach, nineteen years old, never been with a girl, so Frank fixes him up with a cocktail waitress, Jennifer, who has blonde hair and a gap between her teeth. Whenever they make love, she whistles. He doesn't know whether he is shtupping her or making tea. That was one of the cleaner jokes.

The audience knows his act back to front. They get on their feet to salute him right through the performance. Those up front reach to touch his hand. Respect bordering on adoration for Borscht-Belt comedy and Rickles in particular. We laugh until we are gasping. I walk home through a world that isn't guilty but definitely bright. Times Square is packed, as are the hotel restaurants and coffee shops. Concertgoers flood out, waves of them, from the various Lincoln Center venues. I could pretend that a worldwide depression isn't imminent. Good-case scenario, it will last two years. Bad-case, twenty years.

Before I leave for the theatre, I watch an interview with McCain and Palin on national television. McCain says that Obama wasn't palling around with terrorists, but "let me tell voters what Bill Ayers and the Weathermen did back in the '60s."

Friday, 24 October

When I worked at J.P. Morgan, I had an office near the top of the building --the 46th floor--with stupendous views of the entire city and both the Hudson and East rivers and their bridges. I could watch the antlike stream of traffic coursing across the Brooklyn Bridge and along the FDR Drive, tugboats pushing barges in the swift-flowing tidal currents, storms enveloping Midtown Manhattan's skyscrapers. When my boss attempted to remove me from my eyrie, I came close to having a genuine tantrum. All but threw myself on the floor and banged my fists and wailed. The view made the job bearable.

I also had a close-up view of the AIG building across the street. A tower built in the '20s, it featured an executive dining room on its top floor with the kind of art-deco details that make architectural historians salivate. Above the dining room the building ascended in stepped levels that were topped by a mast that was studded with light bulbs. Twice a year, a workman changed those bulbs. He was equipped only with a ladder, a safety harness and a bucket filled with bulbs. Even people who didn't suffer from vertigo had to sit down when they watched this fellow at work fifty storeys above the street. That man and his bucket of bulbs came to mind when Bear Stearns was bailed out, followed by Fannie and Freddie, and then AIG itself. A metaphor for risk--how basic it is. And for regulation--the safety harness.

I now live up high. Thirty-second floor. A number of times every day I get in an elevator that takes me down to the lobby, up to my floor. I never think of the yawning blackness underneath the cab of the elevator or the possibility of malfunction. If I did, I couldn't live here; I've severed myself from the reality of a cab hurtling up and down a void. I enter what amounts to a small room, push a button, and arrive where I want to go. Occasionally when it's very windy, the doors won't close, so you have to push them to meet. The elevators are subject to mandatory inspections, but now and again they make weird thumping and grinding noises, which we report to the front desk, and the repair people are summoned.

In the same way, traders--and their bonuses--have been severed from reality. The numbers exist on a screen. Stocks and bonds used to be real --they'd arrive in trucks and be stored in enormous vaults. These "assets" could be seen and touched. It's said that bankers deal in intangibles: computers increase the level of intangibility while at the same time legitimising it. And sitting at a terminal day in, day out, the yawning black space of bad trades somewhere out in the ether--why dwell on it? If they did, traders probably couldn't do the job; they'd be paralysed with fear. You might say that they are in denial about risk--denial that seeps through the entire industry. Unfortunately, the numbers on computers don't make ominous noises, and even if they did, the SEC wouldn't have shown up.

Computers allow traders and their institutions to de-emphasise the traditional nuts-and-bolts side of banking. If anything, though, despite the sophisticated models constructed by quants, the activities of traders have come to resemble those that go on in bucket shops or boiler rooms, disreputable establishments that are deemed criminal because they sell securities based on an asset they don't own and don't book the sales through an exchange. Sounds exactly the same as over-the-counter derivatives to me, but what would I know? I'm just a gal in a 32nd-floor apartment going bonkers watching MSNBC and CNBC.

The city council has voted to allow Mike Bloomberg to run for a third term. The New York Post puts him on the cover crowned with laurels like a Roman emperor. Asked to comment, Bloomberg admits to thinking, "Oh my goodness. I hope I know what I'm doing."

Obama is visiting his sick grandmother in Hawaii. Knowing no shame, the Republican National Committee is stoking rumours that he is going there to pay off a mistress. Sarah Palin tries to wriggle out of her mistakes, blaming the press, whom she sees as ganging up on her: "If those things were true, I wouldn't like me either."

The Fed is slowly leaking which regional banks will be shored up, which will be allowed to go under. I will refrain from saying anything about moral hazard, layers thereof. We are also discovering that insurance companies across the US are in as bad a shape as the banks. The market swoons, gets up, swoons again. The VIX reaches 90. LIBOR widens.

Saturday, 25 October

Obama's lead slips in the Reuters/C-SPAN/Zog poll from ten points to nine. It's a sure bet that on hearing that, people all over the United States are jumping onto the internet and donating more money to the campaign. I did. Some friends are manning Obama phone banks set up in apartments throughout New York City, others are going house to house out in the battleground states. A lawyer friend is joining the army of volunteer attorneys that will station themselves at polling booths throughout the nation on voting day.

Sunday, 26 October

Last night I went to bed worrying that I'm too obsessed with finance and the ludicrous statements and proposals coming from Washington and just about everywhere else. Enough with the finance, more with the politics. This morning I wake up to find Gretchen Morgenson, one of the New York Times' best and most fair-minded business writers, along with Joe Nocera and Floyd Norris, beginning her column with "My hypocrisy meter conked out last week." Apart from the fact that mine conked out ten years ago, I'm glad to know that I was not the only one watching the congressional hearings into the meltdown with disbelief. A bumper crop of bilge.

A good friend, Mary Ann, a retired lawyer and now president of an influential New York City historical preservation society, calls to tell me the time and place for the weekend breakfast down in Greenwich Village that I've been attending through the year. Her husband, Frank, the former J.P. Morgan banker, is also a participant in the group, dubbed the "Parliament" because the purpose of the breakfast is to discuss politics and now, of necessity, finance. The two of them, along with Dubi, a travel agent with an Israeli firm, and Ruth, a long-time Village resident in her eighties and an education expert, form the core of the gathering.

Other friends attend from time to time, along with visitors from out of town, who are sometimes surprised at the vigour of the debate. This breakfast is where we can vent emotions and share information accumulated in the past week, try out theories and generally seek solace. Also, if I have questions about past political eras, these are the people I ask. During the primaries, everyone took different stances on Clinton and Obama--to be expected, we are Democrats--and discussions were Vesuvian. Now we are all holding our breaths until 4 November.

Mary Ann has signed up for one of the many phone banks that have sprung up around the city--groups who gather in apartments with their cell phones, given scripts and phone numbers, and go at it--and she says the experience has been delightful. Her first round of phoning was to the battleground state of North Carolina, and people responded with Southern courtesy. One elderly gentleman told her, "Martin Luther King marched so Obama could run. Obama is running so our children can fly." (I've received one phone call, from a young woman who told me about Congresswoman Michele Bachmann's McCarthyist statements as a way of soliciting a donation; she stumbled badly over all the names, so I ended up giving her a pep talk and thanked her for volunteering.)

Mary Ann also tells me that one of her close friends, a famous UK journalist who has been touring the country, says there will be dancing in the streets all over the world come 5 November. "Hold that thought," says Mary Ann. Better than holding my breath, but I dismiss the optimism as coming from a Brit who doesn't understand race in this country. Because I come from an Australian farming background, I'm more pragmatist than pessimist, although if asked whether a glass is half full or half empty, I will answer, "What glass?"

Prompted by my account of the Don Rickles concert, Ruth tells me an old Jackie Mason joke: "My father was wiped out in the Depression. A stockbroker jumped from a window and flattened his pushcart." And I share with her a piece I've just read in the latest New York Review of Books by Mark Danner about an Obama rally in north-west Philadelphia in Pennsylvania, another battleground state. It speaks to our constant anxiety about Middle America. Danner writes about atmosphere, crowd reaction, the give-and-take between candidate and audience, all the things impossible to gauge in New York, where we just get lumpy, unsatisfying soundbites. Here's Danner on one of Obama's speeches to a largely black audience. Beautiful writing, in short supply. Danner is criticising the professionals--bloviators and strategists--for whom the rallies serve only as fodder for their "battle of the bites":

   Everything else they [the professionals] would never see. It
   existed only for the several thousand cheering people in Vernon
   Park on that bright morning in Germantown. They would never see,
   for instance, Obama's riff on sweet potato pie. It came as he told
   a story about his campaigning the other day in a "little town in
   Ohio, with the governor there" and how he and the governor suddenly
   felt hungry and "decided we'd stop right there and get some pie."
   Now all of this led to a quite perfect little gem of a story--the
   employees wanted to take a picture with Obama, not least because,
   as they told him, their boss was a die-hard Republican and "they
   wanted to tweak him a little with that picture." All this was
   heading toward a perfectly shaped conclusion, where the owner
   showed up personally with the pie for candidate and governor and
   Obama looked at the pie and looked at the die-hard Republican
   owner and "then I said to him"--perfect, perfectly elongated
   pause--"How's business?" This brought on great gales of laughter
   from the crowd. For the point had already been precisely made: even
   if you are a diehard Republican and you are thinking of your
   self-interest, how can you vote Republican this year? "If you beat
   your head against the wall," said Obama, to a blizzard of "oh
   yeahs!" and "you got that rights!" from the crowd, "and it hurts
   and hurts, how can you keep doing it?" Those two words--"How's
   business?"--that casual greeting thrown at the Republican diner
   owner that showed that there simply could be no other choice this
   year--that showed the case was proved, wrapped up, unassailable ...

   And yet what struck me in this perfect little model of political
   art was a tiny riff inserted into the tiny story, brought on by a
   shout from the crowd. When Obama launched into his story with
   "Because I love pie," a woman in the crowd shouted back, "I'll
   make you pie, baby!" and to the general hooting laughter the
   candidate returned, "Oh yeah, you're gonna make me pie?" Then,
   after a beat, amid even more raucous laughter, and several other
   female voices shouting out invitations, "You gonna make me sweet
   potato pie?" More shouts and laughter. "All of you gonna make me
   pie?"

   "Well you know I love sweet potato pie. And I think what we're
   going to have to do here"--and the laughter and the shouting rose
   and his voice rose above it--"what we're going to have to do is
   have a sweet potato pie contest ... That's right. And in this
   contest, I'm gonna be the judge." The laughter rose and you could
   hear not only the women but the deep laughter of the men taking
   delight in the double entendre that was not only about sex, about
   that pie that that lanky confident smiling young man knew how to
   eat and enjoy and judge, but even more now, amazingly, as people
   came one by one to recognize, about something else. To those people
   gathered in Vernon Park that bright sundrenched morning, an even
   more titillating and more pleasurable double entendre, for it was
   most clearly about something they'd never had but hoped and dreamed
   of having and now had begun to believe they were within the
   shortest of short distances of finally tasting. "Because you all
   know," said the candidate, "that I know sweet potato pie."

Monday, 27 October

Everyone is despairing about the dive in their 401(k) pension plans, which are invested in stocks and bonds. They are also, even the agnostics and atheists, thanking God that Bush failed in his effort to privatise Social Security, which was going to be the crowning achievement of his second term. Now news is coming out that many of the public pension funds for state and city employees are going broke because fund managers succumbed to the siren call of the high returns offered by structured products and hedge funds. Unregulated structured products and hedge funds. All of which was predicted. The dangers inherent in markets--they go down as well as up--and hedge funds--one word: Icarus--were as obvious as dog's balls to anyone with an iota of common sense. But employees were pushed into the plans by companies and corporations who wanted to offload their pension-plan responsibilities.

Indulge me one last time and let me return to my speech-writing days. Along with the advantages of structured finance and the ability of banks to police themselves, two subjects on which I repeatedly had to hammer were the promise of 401(k) plans and the repeal of the Glass-Steagall Act. Known as defined-contribution plans, 401(k)s were just beginning to be touted by the banks when I started the job; we used to joke that they sounded like a breakfast cereal. The idea was that employees should be in charge of their destinies and be able to invest their pension money in the markets, which would gain more in value in the long run, or so the banks declared, producing any number of charts to prove their point, over stuffy defined-benefit plans, which grew on compound interest. The advantage to the banks: a Victoria Falls quantity of money spilling into their coffers. Apart from having a fondness for the "sparkling enfilade of compound interest," as James Buchan described it in Frozen Desire: The Meaning of Money, I also remember attending a press conference on 401(k)s and wondering what happened if you retired when the stock market was down? What if you retired in a recession or, heaven forbid, a depression? By the end of the decade, common-sense questions such as these were moot because 401(k)s became ubiquitous across the US. Millions are now finding out how poisonous they can be.

Common sense also made me be doubtful about the repeal of Glass-Steagall, which was passed in 1933 after the Great Depression to wall off the various areas of banking and insurance from each other so that contagion wouldn't spread. If investment bankers made a mistake, depositors at commercial banks wouldn't be affected; if retail bankers made a mistake, insurance companies would still be solid. The Act was regarded as a fusty relic--a young person's clothes unsuitable for an adult et cetera--that might allow foreign competitors who had no such restrictions to overtake US banks. The walls also prevented banks from growing into "convenient" one-stop financial behemoths. As I wrote those speeches--again, my knowledge was sketchy--I had the heretical thought that maybe those walls might have been put in place for reasons that still held: contagion and conflict of interest. In 1999, the banking lobby prevailed and Bill Clinton signed the Gramm-Leach-Bliley Act. No trumpet blasts as the walls came down; just a loud purring from satisfied bankers.

Tuesday, 28 October

Felix Rohatyn, Jeffrey Sachs and Nouriel Roubini appear at the New York Public Library in a forum moderated by PBS's Charlie Rose. Title: "Can the Economy Be Saved?" I was on my computer when the email announcement of the forum, hurriedly convened, came through and I pounced on two tickets--the event sold out in minutes. People are hungry to understand what's happening.

Each participant on the panel has a different role. Felix Rohatyn represents common sense. He says that we need to teach Americans the difference between investing and spending. He's referring to Republicans calling opponents "tax-and-spend Democrats," and the kind of investing he's talking about is in infrastructure, which will pay dividends in increased productivity. Government isn't spending on a bridge, it's investing in one.

Economist Nouriel Roubini, ubiquitous in the media because he was one of the first to warn against the dangers of Greenspan's easy-money, bubble-promoting policies, represents the dismal science, economics. He is a model of dismalness, with an unending stream of dire predictions underscored by a slumped posture and a grim unchanging facial expression. He speaks in a monotone, with no pauses between sentences. Wreathed in black clouds but also right on just about everything.

Jeffrey Sachs, director of the Earth Institute and an adviser to UN Secretary-General Ban Ki-moon, represents the globe. He points out that the rich governments have put a cordon around their financial institutions and neglected the repercussions for the developing world. He strikes a rare note of optimism when he talks about the students at Columbia, where he teaches. They're fed up. And they think that radical change is not just necessary but possible.

All of them, including moderator Charlie Rose, agree that an inspiring president along the lines of Franklin Delano Roosevelt will make a huge difference even if economic conditions remain difficult. We are in the middle of the Great Panic not just because of the banks but also because of the yawning leadership void in Washington.

It is Sachs who points out the elephant in the room: the American attitude toward taxation. Not allergic--homicidal. In regard to taxes, the nation is in a permanent state of personal and political denial. For the last three decades, beginning with Reagan, the US has lived beyond its means because it has the lowest tax-collection rate in the developed world. And in that time, the education and health systems, along with critical infrastructure, have rotted. An example: the US is continuing to fall behind in the number of students graduating from high school. Once upon a time Americans had the highest rate; now they are thirteenth, behind South Korea, the Czech Republic and Slovenia. The US has become the only industrialised country where children are less likely to graduate from high school than their parents. If the Great Panic turns into the Great Pruning, Americans might be shocked out of their taxation denial, but I wouldn't count on it; it might mean that they will hold onto their dimes and quarters more tightly than ever before. (Audio for the forum can be heard at <www.nypl.org>.)

While waiting for the event to begin, I read an email from Sue. She stood in line in sour weather to attend a taping of The Colbert Report, the program that follows Jon Stewart's Daily Show. Sue thinks Stephen Colbert, who plays a Fox News screaming head, is a national treasure. She emails me his best joke at the taping, which sends up the "Obama is an anti-American socialist" drumbeat coming from the Republican camp: "Clearly the McCain campaign is targeting their most important voter: Joe the McCarthy."

Wednesday, 29 October

This morning I stay in bed and watch House, The Mentalist, Without a Trace and The Shield before I feel ready to face the world. One credit-default swap too many. I'm not the only one suffering from overload. Here's Barbara Rockefeller on the mood of the markets:

   A droll Market News commentator gives us a clue to the prevailing
   reversal psychology--traders in every market are totally exhausted
   from endless crisis. "Deleveraging. Balance sheet issues. Hedge
   fund redemptions. Funding constraints. Margin calls. Month-end.
   Year-end. Flight-to-quality. Forced liquidations. No risk appetite.
   Yen-carry unwinds. Is this getting boring or what?" This captures a
   mood of despair that has become merely boring, so that rising
   equities seem to be a welcome relief and the only feel-good factor
   around in a long time. But rising equities are a snare and a
   delusion. We can understand traders needing relief, but let's be
   realistic--gloom and doom is here to stay.

Not entirely. The Knicks play the first game of the season under their new coach, Mike D'Antoni. No one dared hope because the team is stuffed with expensive players that can't yet be traded. AND THEY WON! Excuse the Archy and Mehitabel lapse into capital letters, but this victory truly warrants it. Jubilation in Madison Square Garden. The "new-look run-and-gun" Knicks made better viewing than the half-hour campaign commercial that Obama ran on all the major network television stations. An infomercial, a genre that is the definition of inauthenticity, but it's a smash hit, gaining 33.55 million viewers, more than the finale of American Idol and the last game of the baseball season.

Thursday, 30 October

You would think that there would be no competition between Obama's youth and intelligence and McCain's old-man bumbling and his pitiful hoisting of the underdog flag. As well, according to polls, stark numbers of Americans are finding Sarah Palin to be unfit for the role of veep. But you would be underestimating the American obsession with taxes, now taking centre stage in the last days of the campaign.

You might find the rhetoric on the subject at the McCain-Palin rallies to be Monty-Pythonesque, but plenty of people don't. Last Saturday Palin proclaimed, "When Obama becomes president, what you thought was yours will really start belonging to somebody else. Everyone else. If you thought your property, inventory, investments, were yours--they would collectively belong to everyone."

Joe Biden had an hilarious exchange on the theme with a news announcer named Barbara West from a television channel in Orlando, Florida.

West: "Senator Biden, you may recognise this famous quote. 'From each according to his abilities, to each according to his needs.' That's from Karl Marx. How is Senator Obama not being a Marxist if he intends to spread the wealth around?"

Biden: "Are you joking?"

Hilarious, yes, but the polling gap between Obama and McCain is narrowing, as history indicated it would. Obama might be in the lead, but the McCain campaign's constant refrain about his opponent raising taxes and spreading the wealth is working. In a New York Times/CBS poll, 47 per cent of voters say McCain would not raise taxes on people like them, up from just 38 per cent who said so two weeks ago.

As well, the stock market has been more or less steady in the last few days, and that's enough for many to assume everything will be hunky-dory and start listening to balderdash about taxes. Not in New York, however, where the mood is funereal. The Wall Street lay-offs are huge, and no one except brokers peddling stocks thinks the rise in the DOW is permanent. The various parts of the financial markets are rising and falling and going sideways in patterns that defy sense, logic and history. As Nouriel Roubini has been at pains to point out, a "serious disconnect."

Cold water is again dumped on the nation in the form of a report saying that consumer spending is the lowest it's been in nearly thirty years, with business spending not far behind. We're officially in a recession. The DOW doesn't move much--the disconnect--but this dire economic news has a silver lining in that it can only help Obama. Nothing like a recession to focus the minds of voters.

Bill Clinton, who has been a no-show since the convention, has come out of his funk and joined Obama on the trail. Clinton is telling crowds that Obama is "America's future" and Obama is responding by calling Bill "a political genius." Obama knows how to stroke an ego: "When you listen to Bill Clinton, you are reminded of what it's like to have a president who's passionate, who's smart ... who has energy, who has vision. You start getting nostalgic about 22 million new jobs and a budget surplus and an economy that's working for everyone."

Friday, 31 October

My political analysis: Obama is brilliant. Joe Biden will make a perfectly good spare. Mavericky McCain has sold his soul to the Far Right. Sarah Palin is a whack job. If the McCain-Palin ticket comes out on top, heaven help us.

I realise that I haven't commented much on Joe Biden. While he's on the side of the angels and has a wicked sense of fun, he's also a Chatty Cathy. The poor fellow has been firmly muzzled by the lockstep Obama campaign because of his gaffes, such as blurting that Hillary would have made a better veep nominee. His worst mistake was saying that the new president is going to be tested by an international incident sooner rather than later. Absolutely true, but the comment placed Obama's lack of experience front and centre. If the Democratic ticket wins, expect Biden to be a source of wisdom, wisecracks and the occasional blooper.

Having delivered those insights, I leave my computer and go down to the Village in search of further hilarity: drag queens dressed as Sarah Palin in the annual Halloween Parade. Nothing like trannies to provide a distraction from thinking about the American purblindness about taxation and the probability of political hanky-panky and malfunctioning voting machines next Tuesday.

On the way, I find the lobby in my building filled with four-year-old princesses and Spidermen stuffing themselves with candy. At the news-agent, the cashier is the Monster Bride, whoever that is, and she looks pretty good. On the subway, Siegfried and Roy with a lion. The parade itself is miles upon miles of New Yorkers of every age, shape and size indulging in fabulous silliness. Some of it is political--yes, trannies as Sarah Palin, a couple as Obama and McCain, both wearing boxing gloves, a fellow as a red-white-and-blue, bullet-shaped Patriot pill holding a banner saying "Under the Influence"--but most are in traditional Halloween garb. Ghosts, witches, ghouls, goblins, skeletons, zombies. My favourite is a group of twenty fellows dressed up as Richard Simmons, dancing to a frantic disco beat.

Further reports are confirming that the tax issue is giving McCain "traction." It's solidifying his base and attracting swing voters. He calls yet again for a lowering of the corporate tax rate so that companies will stay in the US and not decamp to countries where wages are low. Obama doesn't shine a light on evasion of taxes by corporations--too explosive an issue. Instead, he says that Detroit should be saved but restructured. That's called playing it safe.

Whoa! Forget McCain's traction on taxes. Polls are coming at us like meteors. A new one finds that Obama is an average of 6 per cent ahead in most states and has a lead in enough battleground states to get the 270 Electoral College votes he needs for a victory. Maybe the nation is realising that taxes are useful after all; they provide such things as essential services. Could we be about to embrace the idea of an activist government, one that will need a healthy tax base? Oh frabjous day!

An aside: the other thing you need to know about Americans, along with their obsession with taxes, is their love of statistics. Baseball is not about a bat and ball; it's about numbers endlessly sliced and diced, finagled and finessed. Hence the enthusiasm for political polls. Pundits are forever saying that the Electoral College should be abolished and the popular vote used to elect the president. This will never happen because the country would be bereft without that extra set of numbers to play around with.

Saturday, 1 November

The mechanical side of voting in the US is receiving full attention, as it always does several days before an election. Remember the hanging chad? The machines used and the requirements for voting vary from state to state; it's an insane patchwork of dubious reliability. If the outcome of an election is a landslide, well and good, but any close race can be called suspect, hence all the recounting and lawyers from both parties in attendance at polling stations. Efforts to regularise the system always fail because the voting apparatus is in the control of the states, and that means political patronage. A sticker in Ohio, where the election outcome was dodgy in 2004, sums up the inefficiency of the system: "I Think I Voted."

This year the usual worry about malfunctioning voting machines and the deliberate and malicious spread of misinformation has turned into out-and-out alarm because of the enormous surge in voter registration. An example of misinformation: if you are in foreclosure, you can't vote. Another: Your home address and driver's licence have to match. Neither is true. Here in New York, 100,000 early votes got sent to the wrong location, and it's unsure if they can be retrieved. Another vexing problem is the introduction of electronic voting machines--DREs--that are susceptible to viruses and hacking.

The good news is that early voting, usually used by the old and infirm, is attracting thousands who want to avoid long lines on election day and those who have to work Tuesday. A quarter of those eligible have already cast their votes. Oprah made news by casting her vote early: an electronic vote. She didn't press the button hard enough or pressed it too hard--and her presidential vote wasn't registered. I think I voted. Her advice: double-check.

While New Yorkers refuse to count the presidential chicken before it hatches, we are going full bore on predicting who will fill cabinet positions in an Obama administration. A parlour game of sorts.

I dine with Australian friends. One of their guests is a semi-retired accountant knowledgeable about securitisation. I explain to him that entire units at many major US banks and insurance companies had no board oversight, no limits on leverage, no risk management, few or no capital requirements, inadequate accounting. Taken together, no understanding of risk and not, as many financial experts are arguing, a misreading of it.

Makes no sense, but that's what happened. He doesn't believe me. Looks at me like I'm a nutter.

On a trip to Australia in May, I repeatedly puzzled aloud at the spending down of the surplus that Kevin Rudd had inherited when a worldwide economic downturn was looming. Even blind Freddie, or the politically correct equivalent thereof, must know this. The response: Australia had no subprime problems. Not subprime, I'd say, the fall-out from subprime. So goes the United States, so goes the rest of the world. And the reaction again was as if I were not a Cassandra but a nutter.

I was often told that Australia will be fine because its fortunes are hitched to China, an unstoppable economic power. But China is still an autocratic communist country and one that wields blunt economic instruments. And it might not be quite so unstoppable. I've heard that at least 15,000 plants have closed in China in the last few months, a fact which its ever-secretive leadership has been at pains to hide. This helps with the tainted food and toy problem, but not much else.

Sunday, 2 November

Dick Cheney endorses John McCain. Cheney's approval ratings are at 18 per cent, lower even than Bush's. With friends like these ... After he gives his endorsement, Cheney has a throaty coughing fit. Something sticking in his craw?

Sales of assault weapons are booming in states with liberal gun-control laws because of fears that Obama will ban them. And you never know, you might need a semi-automatic rifle with a commie running the country.

Ceaseless door-knocking and relentless phone-calling is going on all over the nation. The Obama campaign is not allowing one voter to go unturned.

Going through my notes, I am cheered by an auto-worker in Michigan who said of Obama, "I don't care if he's polka-dot as long as he can get us out of this mess."

Monday, 3 November

Kathy, an art-dealer friend, describes for me the experience of canvassing for Obama in Philadelphia's Ward 26, a ghetto neighbourhood that is black and Hispanic but also heavily Catholic. Lots of undecideds because of the abortion issue. Invariably the first question would be about Obama's pro-choice stand. Kathy would explain that he didn't like the idea of abortions at all. Instead, he wanted to start a major effort to reduce unwanted pregnancies. She would then turn the conversation to the economy or Iraq. Several black men told her that they would not vote for Obama just because he was black. Fair enough. A few doors were slammed in her face, along with a stream of not-so-fleeting invective. But nearly all the conversations finished with the householder saying, "Have a blessed day," not something we hear in New York.

Kathy was also sent to a Republican suburb that she says was like the set from The Truman Show. The experience was downright weird. No cars, no children playing, no dogs being walked, no music or television sounds issuing from houses. And no one answering their door. But people were inside. She could see movement.

The Christian Science Monitor runs a heart-warming piece by Jonathan Curley, an undecided voter who was persuaded by his wife to tag along while she canvassed for Obama:

   There has been a lot of speculation that Barack Obama might win
   the election due to his better "ground game" and superior campaign
   organization. I had the chance to view that organization up
   close this month when I canvassed for him. I'm not sure I learned
   much about his chances, but I learned a lot about myself and about
   this election.

   Let me make it clear: I'm pretty conservative. I grew up in the
   suburbs. I voted for George H.W. Bush twice, and his son once. I
   was disappointed when Bill Clinton won, and disappointed he
   couldn't run again. I encouraged my son to join the military. I was
   proud of him in Afghanistan, and happy when he came home, and
   angry when he was recalled because of the invasion of Iraq. I'm
   white, 55, I live in the South and I'm definitely going to get a
   bigger tax bill if Obama wins.

   I am the dreaded swing voter.

   So you can imagine my surprise when my wife suggested we
   spend a Saturday morning canvassing for Obama. I have never
   canvassed for any candidate. But I did, of course, what most
   middle-aged married men do: what I was told. At the Obama
   headquarters, we stood in a group to receive our instructions. I
   wasn't the oldest, but close, and the youngest was maybe in high
   school. I watched a campaign organizer match up a young black man
   who looked to be college age with a white guy about my age to canvas
   together. It should not have been a big thing, but the beauty of the
   image did not escape me.

   Instead of walking the tree-lined streets near our home, my wife
   and I were instructed to canvass a housing project. A middle-aged
   white couple with clipboards could not look more out of place in
   this predominantly black neighborhood.

   We knocked on doors and voices from behind carefully locked
   doors shouted, "Who is it?"

   "We're from the Obama campaign," we'd answer. And just like
   that doors opened and folks with wide smiles came out on the
   porch to talk.

   Grandmothers kept one hand on their grandchildren and made
   sure they had all the information they needed for their son or
   daughter to vote for the first time. Young people came to the door
   rubbing sleep from their eyes to find out where they could vote
   early, to make sure their vote got counted. We knocked on every
   door we could find and checked off every name on our list. We did
   our job, but Obama may not have been the one who got the most
   out of the day's work.

   I learned in just those three hours that this election is not about
   what we think of as the "big things." It's not about taxes. I'm
   pretty sure mine are going to go up no matter who is elected. It's
   not about foreign policy. I think we'll figure out a way to get out
   of Iraq and Afghanistan no matter which party controls the White
   House, mostly because the people who live there don't want us there
   anymore. I don't see either of the candidates as having all the
   answers.

   I've learned that this election is about the heart of America. It's
   about the young people who are losing hope and the old people
   who have been forgotten. It's about those who have worked all their
   lives and never fully realized the promise of America, but see that
   promise for their grandchildren in Barack Obama. The poor see a
   chance, when they often have few. I saw hope in the eyes and faces
   in those doorways.

   My wife and I went out last weekend to knock on more doors.
   But this time, not because it was her idea. I don't know what it's
   going to do for the Obama campaign, but it's doing a lot for me.

Tuesday, 4 November

Dancing in the streets if Obama wins. Rioting if not. I can't believe Obama won't win--those long lines at polling booths from coast to coast aren't Republicans--but this is a bloody-minded, unpredictable country.

Much blather on the networks that we are on "the precipice of history." I vote at the High School for the Performing Arts behind Lincoln Center. It's a tiny polling centre, only two booths. And the machines are the antiquated lever type that are so old that if you push the lever hard enough, or so the joke goes, you might end up voting for Coolidge. But they are reliable, even if a mechanic has to be called in now and again. I have only a short wait but the polling staff say they were besieged earlier in the day, before the work day began.

Obama wins. A landslide. Highest voter turnout since 1960, when John Kennedy electrified the nation with his youth and optimism. Obama's victory speech is pitch-perfect, shot through with echoes of Lincoln, FDR, JFK and Martin Luther King. His words are inspiring but sobering: "The road ahead will be long. Our climb will be steep. There will be setbacks and false starts." The intensity with which people listen to him scores my brain, impresses me even more than the speech itself. "Here comes everybody," yes, and they have a hunger for a leadership that believes in a capacious common good, a need for a decisive break with the incestuous politics and sulphurous practices that have characterised Washington in the past forty years.

Serendipity, maybe, but Obama gives his acceptance speech in Chicago's Grant Park, where anti-war protesters and police clashed violently at the 1968 Democratic Convention. The year that hope died in the United States. And now, forty years later, by electing Barack Obama, young people and people of ordinary good will are again believing that they can change the United States.

The television networks are justifiably in raptures about the historic election of an African-American as the president. All the same, while it is astonishing that a man of colour could be elected president, given hundreds of years of vicious racial discrimination, to reduce Obama to a label, to "African-American," does him--and us--a disservice. He wasn't elected for the colour of his skin; he was elected because he offered the hope of a wise, steady and healing leadership to a country bullied and battered in the name of patriotism, plundered and pillaged in the name of free markets, neglected and abandoned in the name of small government.

More to the point, Obama is an extraordinary stew of ethnicity and Influences--Kenya, Indonesia, Kansas, Hawaii. He's our first post-colonial world leader. Maybe even our first post-ideological leader, unless you count being a progressive as an ideological stance rather than one indicating common sense. As I watch him I want more than anything for my husband to have lived to see this moment. He was a Southern boy who was himself a racial blend, a hodgepodge of similar hopes and yearnings. And a beneficiary of and believer in FDR's New Deal. And then I remember my young nephew and niece, Harry and Ya-Ya, likewise a dazzling mixture, and I smile.

Karl Rove agrees with me! Rove is now a screaming head on Fox News. He thinks everyone is making too much of the election of an African-American to the presidency. Why, we got beyond race a long time ago, says Rove. In fact we've already had a black first family: the Cosbys. He's not joking.

Immediately after Obama leaves the stage at Grant Park, we hear from black politicians but not from anyone representing the rest of us--the polka-dots. And not from the college kids who were the foot-soldiers, the first and truest believers in the possibilities presented by an Obama presidency.

Obama doesn't forget them, though. The minute that it was clear he had enough Electoral College votes to become president, an email with the subject line How This Happened goes out to every last person who donated to his campaign:

   I'm about to head to Grant Park to talk to everyone gathered there,
   but I wanted to write to you first.

   We just made history.

   And I don't want you to forget how we did it.

   You made history every single day during this campaign--every
   day you knocked on doors, made a donation, or talked to your
   family, friends, and neighbors about why you believe it's time for
   change.

   I want to thank all of you who gave your time, talent, and passion
   to this campaign.

   We have a lot of work to do to get our country back on track, and
   I'll be in touch soon about what comes next.

   But I want to be very clear about one thing ...

   All of this happened because of you.

   Thank you,

   Barack

His campaign rarely missed a beat, and neither will his administration.

POSTSCRIPT

The day after the election, the New York Times had a one-word headline: OBAMA. The stock market ratcheted downward. Dmitry Medvedev, the Russian president, ordered the deployment of nuclear-capable missiles on Poland's border for the first time since the Cold War. An international incident sooner rather than later.

The next day, I attend with three of my women friends--a Palinesque shout-out to Sue, Kathy and Nancy--a taping of The Daily Show. A fitting end to an era, or so we thought. Before the taping begins, Jon Stewart always takes questions. I don't have a question--I just want to say thank you for getting us through the past eight years--but my friends scotch that idea: too soppy. Uncharacteristically soppy.

There has been some worry that Stewart will have trouble finding humour in an Obama administration. But comedy material didn't vanish--poof!--on Tuesday. To wit a clip that Stewart used of Gordon Brown, plonker to end all plonkers, commenting on Obama's victory: "This is a moment that will live in history as long as history books are written."

At the end of the taping, Stewart says what a pleasure it is to do shows in front of happy audiences. Not soppy, just sincere. And we are happy. Giddy! The euphoria hasn't worn off. I am marvelling at how a country's mood can change from despair to hope overnight. Walter, a screenwriter friend and also a World War II veteran, remarks that the only time he can remember a similar outpouring of joy and a nationwide sense of relief was on VE Day.

Then and now, singing and dancing. Our mood isn't affected by the announcement that so far in 2008 1.2 million workers have lost their jobs, with most of the shucking occurring in the last three months. And I shrug off the news that condo prices in my immediate neighborhood are up 25 per cent. Some of that bailout money, no doubt, making our world even brighter and guiltier. My private soundtrack has been Beth Orton's cover of "Ooh Child": Ooh-oo child, things are gonna get easier / Ooh-oo child, things'll get brighter. And Leonard Cohen's "Anthem": Ring the bells that still can ring / ... There is a crack in everything / That's how the light gets in. What a year we've had!

New York City, 7 November 2008

Acknowledgements

"Who You Callin' a Maverick" by John Schwartz. From The New York Times, 4 October 2008 [C] 2008 The New York Times. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of the Material without express written permission is prohibited.

"Obama & Sweet Potato Pie" by Mark Danner is reprinted with permission from The New York Review of Books. Copyright [C] 2008 NYREV, Inc.

"My wife made me canvass for Obama; here's what I learned" by Jonathan Curley is reprinted with permission from 3 November 2008 issue of The Christian Science Monitor (http://www.csmonitor.com). [C] 2008 The Christian Science Monitor. All rights reserved. For permissions, contact [e-mail].