For a long time it was a cliche, one that was reasonably close to the truth, that the reporting at the Wall Street Journal was excellent, while the editorial page was a disgrace–a constant stream of right-wing lies.

Now it’s pretty clear that the reporting is infected as well.

Exhibit A is today’s piece on the “ground zero” “mosque”, which, although largely factual (in the sense that it simply quotes people who make insane statements, or statements about what insane people will do) says that Obama’s remarks “nationalize” the debate. As if, somehow, this had been an internal New York debate before that.

Really, of course, all this fake outrage isn’t playing well in New York–national politicians have been behind this bullshit since it began.

Edit: Here’s a pretty good timeline of how things really went down.

I really have no idea whether this story–where a commodities trader accidentally winds up having 28,000 tons of real, actual, physical coal dumped off at his workplace–is real. But it’s a good yarn, and it shows how the world of commodities traders is so unrelated to the stuff being traded that the very idea of a commodities trader actually buying a real-life commodity is way-out wacky, “News of the Weird” type stuff.

In real life, the commodity markets are dominated, not by farmers locking in the price for their corn while it’s still in the field, but by professional traders who never see a bushel of corn or an ounce of tin. These traders just take empty bets on the price of commodities, not actually contributing in any useful way to the market’s ability to judge supply and demand.

This isn’t quite the definition of a bucket shop (which is illegal), but it’s still pretty clearly gambling rather than investment.

Here’s an article I missed about how Chase treats its customers. I’ve experienced the same disregard. They never got to the point of outright stealing from me (they just gave me a loan in the free-money days of 2006-2007 at reasonable interest “for the life of the loan” and then demanded it back), but then, I got my money out before they got the chance.

Seriously–Chase treats its depositors as just another revenue stream, and not a very valuable one unless they can be squeezed. If you have money there, get it out before they squeeze you.

Here in Vanity Fair. Hat tip to askheidi at Reddit.

I love any combination of economic commentary and cartoons (for obvious reasons); I was particularly tickled to see this a week or so ago–it’s Chris Ware’s rejected cover for Fortune’s May issue. Check it out–it’s worth savoring.

Krugman’s nearly always good, but this column is simply superb–a reader who started the column not knowing a blessed thing about ratings agencies would, by the end, understand what they do, what the problems with them are (93% of mortgage-backed securities given AAA ratings in 2006 are now junk, which I didn’t know), and what to do about them, both in general and a specific possible action. Seriously. Go read it.

In a PBS interview, presidential advisor (and Clinton treasury secretary) Larry Summers gave his take on financial reform. Most of the interview is unobjectionable, but this gave me (and others) pause:

Most observers who study — who study this believe that to try to break banks up into a lot of little pieces would hurt our ability to serve large companies and hurt the competitiveness of the United States.

But that’s not the important issue. They believe that it would actually make us less stable, because the individual banks would be less diversified and, therefore, at greater risk of failing, because they would haven’t profits in one area to turn to when a different area got in trouble.

And most observers believe that dealing with the simultaneous failure of many — many small institutions would actually generate more need for bailouts and reliance on taxpayers than the current economic environment.

Others think that Summers is simply lying here, and he may be. But I think it’s worse–I think he really believes it.

After all, Summers is the guy who once said, “Spread the truth—the laws of economics are like the laws of engineering. One set of laws works everywhere.” Thing is, every real-world market is different–the only case where you get one set of laws is if you have perfectly functioning competitive markets.  So Summers is, essentially, unable to distinguish between how things should work in a textbook-perfect free market and how things do work in the real world.

And yes, in a textbook market, he’s right–diversification helps individual companies stay stable.

But in the real world, especially the real financial world, it all too often does the opposite–one trader (like Nick Leeson of Barings) or a small group of traders (like the derivatives division of AIG) can bring down an otherwise stable company.

Really, smaller banks, which would have different strategies and take different risks, and which would therefore probably not all fail at the same time, are the honkingly obvious solution. Either Summers genuinely does not see that, or maybe he actually is lying. Either way, why are we listening to this guy?

I came across this article recently, in which David Murrin, a hedge fund manager, opines that Obama’s tepid health care reform means the death of the American Empire. See, it shows that Americans want handouts, won’t take responsibility for themselves, bla bla bla.

I don’t recommend actually reading the article–it’s entirely the sort of drivel that an intelligent high-schooler would be embarrassed to sign her name to. But it illustrates a larger point—Wall Streeters, even very successful ones, are not particularly knowledgeable or insightful about the world outside Wall Street.

As proof, consider the Wall Street Journal editorial page. It’s a cliché, but one that was reasonably true until recently, that the WSJ’s reporting was excellent while the editorial page was crap. Now the reporting is falling off too, but I’m concerned with the editorial page right now. It’s been crap for decades—a constant stream of dumb theories (supply-side economics might never have gone anywhere if the editorial page didn’t keep pushing it) and blatant lies (remember Vince Foster? The Clinton staffer who tragically killed himself? The WSJ ran more than 40 editorials claiming, with no evidence, that Bill and Hillary killed him).

In other words, the WSJ editorial page treats its readers—Wall Streeters—like boobs.

This leaves two possibilities: One is that Wall Streeters realize that they’re being treated like idiots, but they’re so mellow and easygoing that they don’t mind. The other is that they don’t notice.

And they’re not known for being mellow and easygoing.

The Chinese are selling US debt.

That’s a big deal because, for the past several years, the Chinese have been selling their own currency and buying dollars (and other foreign currencies). If they start flooding the world with that money, the dollar might start to stumble.

And if the dollar starts to stumble, it might collapse–in the 1970s the dollar went from being the official foundation of the world financial system, exchangeable for gold, to just another currency. But there were a lot of dollars overseas, and America has gone through contortions to keep them there rather than have them come home and cause inflation. Hence, lots of pressure on the oil states to keep selling oil in dollars (so that there’s something a dollar will buy), for instance.

If the Chinese keep selling, it may not be just their dollars but ALL the dollars that have been out there since WWII that come home.

Short term, that would be bad, hence the title. But that’s because in today’s complicated world, almost any conceivable big economic change would be bad in the short term. (Switching, as much as possible, from coal to wind and solar power is a very urgent task, but the initial disruption would be massive and painful).

But really, maybe it’s time to let those dollars come home. First of all, this is about the best time for it–we have deflation right now, not inflation, so more money in people’s pockets would stop the deflation before it started inflation.

And one of the ways we kept the dollar away was to keep our money overvalued, killing our exports. That is, it’s not exactly that the Japanese make a car of a given quality cheaper, it depends on the exchange rate. A Japanese car that costs a million yen is more expensive than an American car that costs $10,000 if the dollar is 99 yen (1,000,000/99  = 10101), and it’s cheaper if the dollar is “weaker” at 101 yen. (1,000,000/101 = 9901). So if the dollar loses value, American products will be cheaper and people will buy them again.

In fact, the reason that China exports so much is not that it makes stuff with less labor, capital, and environmental damage. It’s not that Chinese stuff is better (good lord not). And it’s only partly that Chinese labor is poorly paid. It’s mainly the exchange rate–when Chinese sold their currency and bought dollars, they kept their money cheap and their goods cheap. And the flood of cheap Chinese goods was great for China but not so much for anyone else.

So in the less short term, maybe this is just what we need.

Inflation may be a problem in the longer term, of course, but worrying about it right now is, as Keynes said (I’m paraphrasing) like lecturing a starving man about the dangers of obesity. I would trade the economy of the high-inflation seventies for today in an instant.

So apparently, in the 2012 Olympics the police will have the power to stop people from entering events with non-sponsor items.

Now I think that most everything you can buy is actually generic—cola is cola, soap is soap, a shirt is a shirt—and the fact that people actually care about brand is just sad. Really, if Coke sponsors the Olympics and you wanted to drink a Pepsi, the very fact that you have an opinion on the marginal taste difference between two crappy colas suggests that you’re a massive loser.

But still: the power of the state will be used, or at least be available, to force people to buy one brand instead of another. That’s just wrong.

Adam Smith said it best:

“It is unnecessary, I imagine, to observe, how contrary such regulations are to the boasted liberty of the subject, of which we affect to be so very jealous; but which, in this case, is so plainly sacrificed to the futile interests of our merchants and manufacturers.”

In that quote Smith was talking about mercantilism (where powerful sellers dominate the economy, the government, and the population, and their need to sell is treated as more important than anything).

And:

“It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to. . . .”

This happens in the US too; for instance, in many states it’s illegal to criticize the food supply (and hooboy is the food supply horrifying).

How did we get here? That’s a post for later.