Today, commodity prices across the board, from coffee to carbon fiber, remain near 25-year highs. High oil prices are not a unique phenomenon, but just another commodity whose price is determined primarily by the value of the dollar. Expensive oil isn't exclusively a monetary event, of course: Risk and demand matter, too. But in comparing oil to other commodities, especially gold, we find that elevated risk and demand explains only $10-$15 of the higher oil price; $30 of the price is explained by a weak, inflationary dollar. The entity most responsible for expensive oil is thus the Fed.

For more evidence of the centrality of the dollar's value, consider what happened to oil just a few years ago. In 1998 the price of crude plunged to $10 per barrel. At the time, China had been growing at 10% per year for 20 years, the U.S. economy was growing fast at 4%, and the Middle East was typically if not maximally volatile, with Saddam testing the U.N. inspection process and the U.S. sending Tomahawks back his way. Demand and geopolitical volatility were fairly high in 1998, and ominous "peak oil" theories had been around for a while; yet oil was just a seventh of today's price. Other commodity prices were also at multidecade lows, with gold sinking below $275 per ounce (versus today's $640). The common factor was a superstrong currency -- a severe shortage of dollars. This deflation roiled world markets and bankrupted many companies and nations with dollar debts: Thailand, Indonesia, Korea, Turkey, Argentina.

The deflationary dollar sent a struggling but oil-rich Russia over the edge into default. Russia today supposedly has some magical power to set world prices, yet in 1998 oil was $60 less expensive, and a desperate Russia was helpless to achieve higher prices. Even after 9/11 and the take-down of the Taliban, oil still traded at $20 per barrel. Adjusted for inflation, this was the price of oil in 1970 -- and in 1960, and 1950.

Then the Fed started making inflationary mistakes. Alan Greenspan's liquidity injections after 9/11 had mercifully relieved the deflation of 1997 to 2001, but the Fed overdid it. By leaving interest rates at 1% for far too long in 2003-04 and then raising interest rates far too slowly through 2006 -- even though the economy and commodity prices had long since recovered -- the Fed weakened the dollar and juiced oil prices.

The list of impressive and eclectic guest voices continues to grow, with actors like Kiefer Sutherland, Natalie Portman, Michael Imperioli, Joe Pantoliano, Joe Mantegna, The White Stripes and Dr. Phil McGraw making voice appearances next season on THE SIMPSONS airing Sundays (8:00-8:30 PM ET/PT) on FOX. Other upcoming guest voices include famed authors Tom Wolfe, Gore Vidal, Michael Chabon and Jonathan Franzen.

Democrats who claim to want "focus" on the war on terror have wanted it fought without the intelligence, interrogation and detention tools necessary to win it. And if they cite "cooperation" with our allies as some kind of magical answer, they should be reminded that the British and other European legal systems generally permit far more intrusive surveillance and detention policies than the Bush Administration has ever contemplated. Does anyone think that when the British interrogate those 20 or so suspects this week that they will recoil at harsh or stressful questioning?

Another issue that should be front and center again is ethnic profiling. We'd be shocked if such profiling wasn't a factor in the selection of surveillance targets that resulted in yesterday's arrests. Here in the U.S., the arrests should be a reminder of the dangers posed by a politically correct system of searching 80-year-old airplane passengers with the same vigor as screeners search young men of Muslim origin. There is no civil right to board an airplane without extra hassle, any more than drivers in high-risk demographics have a right to the same insurance rates as a soccer mom.

Wednesday night was a long and troubling one for Homeland Security Secretary Michael Chertoff. A bubbling plot by British citizens to blow up airplanes had come to a boil in the past three days, and as British authorities arrested dozens of suspects around London, it was Chertoff's job to coordinate the U.S. defenses. Scary intelligence reports pop up all the time, but this particular terror operation got close enough to being carried out that it rattled even the normally sedate Chertoff. "Very seldom do things get to me," he told Rep. Peter King, the Republican chairman of the House Homeland Security Committee, in a phone call late Wednesday night. "This one has really gotten to me."

Chertoff had good reason to be worried. Senior U.S officials have confirmed to TIME details of the plot that led the secretary to ratchet up the color-coded security alert for British-U.S. flights to an unprecedented red for "Severe." A total of 24 individuals were arrested in Britain overnight and, says one senior U.S. official who was briefed on the plot, five still remain at large. Their plan was to smuggle the peroxide-based liquid explosive TATP and detonators onto nine different planes from four carriers — British Airways, Continental, United and American — that fly direct routes between the U.K and the U.S. and blow them up mid-air. Intelligence officials estimate that about 2,700 people would have perished, according to the official.

Britain's MI-5 intelligence service and Scotland Yard had been tracking the plot for several months, but only in the past two weeks had the plotters' planning begun to crystallize, senior U.S. officials tell TIME. In the two or three days before the arrests, the cell was going operational, and authorities were pressed into action. MI5 and Scotland Yard agents tracked the plotters from the ground, while a knowledgeable American official says U.S. intelligence provided London authorities with intercepts of the group's communications. Most of the suspects are second or third generation British citizens of Pakistani descent whose families hailed from war-torn Kashmir. U.S. officials believe the 29 members were divided into multiple cells and planned to break into small groups to board the nine planes.

During the past few months the plotters' attack plans had changed, > said Deputy Secretary for Homeland Security Michael Jackson. "There were different data sets about their interests over time that evolved," he said. It was only in recent days, said Jackson, that the plans began to focus on British-U.S. flights. The plot was "very near execution" but not imminent, Jackson said. "We didn't pull people off of airplanes."

So as not to derail the British round-up, Chertoff had to wait until the early hours of Thursday morning after all the London arrests were made before notifying U.S. airports of the threat, say senior DHS officals. When it became clear the arrests would be wrapped up around 1 a.m Washington time, Chertoff got on a conference call with his Homeland Security Advisory Committee to approve changing the threat level. Then calls when out to the airlines, airline security companies and labor unions affected by the changes, as well as to members of Congress.

Though the plot has all the hallmarks of an al Qaeda operation, U.S. officials cautioned that there isn't yet evidence of a direct link between the plotters and the organization's top leaders. "We're not convinced this particular operation is connected to the al Qaeda chain of command," Charles Allen, Chief of Intelligence for the Department of Homeland Security, told reporters on Thursday afternoon. As for whether the attack was being timed for the fifth anniversary of Sept. 11, Allen said he thought the attack would simply be launched when it was ready. "I am a long standing believer that terrorist plotters or planners execute when they have all of the plot together," said Allen. "We have no evidence this was timed to any particular holiday or special event."

The plot also appears to be a return to older terrorist tactics of trying to blow up an airplane in mid air, rather than turn the jet into a missile as the Sept. 11 attackers did. Allen stressed that the plans seemed designed to kill passengers, not crash into a city on the ground. "We have no evidence there was targeting of cities," said Allen, "This was an effort to destroy multiple aircraft in flight — not against any territory of the United States."

With five members of the cell believed to be at large, the threat still looms and intelligence officials are still working to unravel the full extent of the plot. "I don't believe we know all the dimensions of this plot. Time has to pass to determine that a network was disrupted," said Allen. Worries another U.S. official: "Plan A has been stopped, but the concern: Is there a Plan B?"

The possibility that liquid explosives could be smuggled onto a plane is not a surprise to counterterrorism experts, and the tightening of U.S. airport security could only be temporary as security officials learn more about the extent of the plot and how to defend against such an attack. The current measures — stripping passengers of anything liquid in their carry-on luggage — were in reaction to these particular arrests, and not to the realization of a new, unforeseen threat. "We're primarily concerned about this particular plot," said Allen, implying that the new security measures are not permanent.

FBI and Department of Homeland Security officials quickly alerted law enforcement agencies around the country to the peroxide-based liquid explosives the London plotters planned to bring aboard the American-bound planes. An alert the FBI and DHS sent out Thursday to state and local law enforcement agencies — which is classified "For Official Use Only" and was obtained by TIME — warns them that the peroxide-based explosives could also be employed in future attacks here.

The Joint Homeland Special Assessment, which the FBI and DHS's Office of Intelligence Analysis drafted and sent out, is titled "Possible Terrorist Use of Liquid Explosive Materials in Future Attacks." The document states: "The FBI and DHS have no information of plotting within the United States, but such a possibility cannot be discounted." The FBI-DHS report notes that Osama bin Laden's top deputy, Ayman al-Zawahiri insisted in a July 27 videotape that Al Qaeda was still intent on conducting another "spectacular" attack in the United States. Zawahiri, the report notes, used photos of the World Trade Center burning on Sept. 11 and 9/11 leader Muhammad Atta "in the background of this video."

The FBI-DHS report next warns law enforcement agencies about the two peroxide-based liquid explosive that could be used in a future attack against the U.S.--triacetone triperoxide (TATP) or hexamethylene triperoxide diamine (HMTD). The report describes how a terrorist would assemble bombs with these chemicals. Peroxide-based liquid explosives "are sensitive to heat, shock, and friction, can be initiated simply with fire or electrical charge, and can also be used to produce improvised detonators," the report states. "For example, TATP or HMTD may be placed in a tube or syringe body in contact with a bare bulb filament, such as that obtained from inside a Christmas tree light bulb, to produce an explosion." The report doesn't mention anything about a terrorist assembling such a bomb on a plane, but it does warn that manufacturing such a device can be dangerous for the bombmaker. "Because of the instability of these substances," the report notes, "spontaneous detonation can occur during the production process."

Over the past ten years peroxide-based explosives have popped up in a number of terror operations, according to FBI-DHS report. "Terrorist have used peroxide-based explosive both as a main charge (weighing in excess of 20 pounds) and improvised detonators," the joint assessment states. "TATP was popularized as a main charge explosive in suicide bombs used by Palestinian terrorist groups."

Ramzi Yousef, who was convicted in 1996 for plotting to simultaneously bomb up to a dozen U.S. commercial airliners flying in the Far East, had manufactured TATP detonators. Arrested Dec. 14, 1999, for planning to attack Los Angeles International Airport in the millennium bombing plot, Ahmed Ressam had HMTD and RDX (cyclotrimethylene trinitrame) in a vial in the trunk of his car. He also had over 100 pounds of urea sulfate white powder and eight ounces of nitroglycerine mixture.

More recently, British shoe bomber Richard Reid tried to detonate his device with TATP as the initiator while aboard a Dec. 22, 2001, American Airlines flight from Paris to Miami. A mixture of TATP and ammonium nitrate was used in suicide bombs in Casablanca, Moroco on May 16, 2003. And the FBI-DHS report notes that four of the suicide bombers in the London subway attack July 7, 2005 "used peroxide-based explosive devices (IEDs), concealed inside rucksacks." With such a rich history, liquid explosives are sure to challenge America's counter-terror defenses for many years to come.

Thanks to reader David Duval for the link.

Update... Our "public editor" Irwin Chusid has a view:

Just my two cents: When I read your intro, the first word that came to mind was "Muslim." Sure enough, it does not appear in the Times article. I think "Muslim" would be a more appropriate "right answer" since it refers to individuals, whereas "Islam" refers to the religion. Religions don't instigate terror attacks; some of their more extreme adherents do. I wouldn't think it appropriate for the Times to use the "I"-word in the context of reporting the thwarted attack, but it certainly should have used the "M"-word because all the suspects seem to fit that category.

Update 2... Reader David Duval adds that the media don't hesitate to to use the "I" word or the "M" word when defending the rights of this beleaguered minority. BBC News:

...police "need to do a lot more thinking" before that can happen, argued Fahad Ansari from the Islamic Human Rights Commission, because their intelligence was "flawed".

"For four years we've been seeing more and more innocent people being harassed and demonised," he told BBC Radio 4's Today programme.

"We've seen very few terrorists being captured but a lot of innocent people destroyed.

"The more you alienate a community, it's not going to be good for future relations."

Econospinning: How to Read Between the Lines When the Media Manipulate the Numbers, by Gene Epstein, economics editor at Barron's.

Imagine lengthy polemics against the use of numbers in the work of Paul Krugman (most of all), the Op-Ed page of The Wall Street Journal, Brad DeLong, Steve Levitt, and Barbara Ehrenreich, among others. Except this vehicle isn't the blogosphere, it is a book!

This one is guaranteed to ruffle feathers. Here is the book's home page.

Out in the real world...things are not proceeding according to script, at least for those who insist that what the Internet really needs is a brand-new layer of government regulation. Yesterday, Sprint announced plans to spend as much as $3 billion building a nationwide WiMax network that would provide high-speed Internet access to 100 million consumers by 2008, according to Sprint's estimate.

Those who want to regulate broadband providers are saying that the phone and cable networks are too valuable and too hard to replicate for anyone to break up the duopoly. We guess Sprint didn't get the memo. If Congress should for some reason lose its cool and give in to the MoveOn.org crowd pushing for greater Internet regulation, it will likely come just in time for its backers, once again, to be proven wrong about the absence of competition in telecom.

Federal Reserve Chairman Ben S. Bernanke will return to his home state of South Carolina this summer for a Leadership South Carolina event.

Bernanke...will be awarded the Order of The Palmetto and honored in Dillon with the naming of Sept. 1 as Ben Bernanke Day...

MANCHESTER, N.H. - Dick Bennett has been polling New Hampshire voters for 30 years. And he’s never seen anything like it.

“Lying b**** . . . shrew . . . Machiavellian . . . evil, power-mad witch . . . the ultimate self-serving politician.”

No prizes for guessing which presidential front-runner drew these remarks in focus groups.

But these weren’t Republicans talking about Hillary Clinton. They weren’t even independents.

These were ordinary, grass-roots Democrats. People who identified themselves as “likely” voters in the pivotal state’s Democratic primary. And, behind closed doors, this is what nearly half of them are saying.

Capitalizing on the emerging twin cultures of cars and fast food...[the Synders] introduced a two-way speaker through which drivers could order food and then have it handed to them without leaving their vehicles.

Many credit the Snyders with introducing California's first drive-through restaurant. At the very least, the Snyders made the innovation so popular and practical that other fast-food establishments soon followed their lead.

Given the problems Landis is experiencing as winner of the Tour de France, and the likelihood of his title being stripped, what impact would there be from Tradesports contracts? I cannot find anything on the subject on-line.

1.4. Official Changes to the Result

Any official changes to the outcome of an event or season after the time that the relevant result is declared (see individual contract rules for these timings) will be disregarded when setting the expiry price. Therefore, disqualification, re-instatements or points amendments made after a season or event has concluded will be disregarded. Changes to the result made before the relevant official result is declared will be taken into consideration when setting the expiry prices.

"Suddenly — really just in the last few weeks — people have starting talking seriously about a possible recession."

Update... Phil Klein says "Time to buy U.S. stocks."

Update 2... Reader Neil Ferguson says,

So Paul Klugman, Economist to the Nomenclatura, will have predicted four of the last zero recessions? Concerned citizens should send him broken clocks made out of construction paper, as aides brainoirs. (Not real broken clocks! That would be an abuse of the mailroom staff.) He can use the clocks to improve his batting average, if he can ever resist fiddling with the hands.