This morning, a red, heart-shaped balloon, with a message attached, breezed by our seventh-storey office window. Who had lost it? Whose heart would be broken when they didnâ�,��"�t get it? Or would it fall to earth in the arms of some deserving princess, and delight her by accident?

Love is in the air. We love our friends. We love our family. We love our dear readers.

And yes, we love our work.

We love it because it is so easy...and so amusing.

What is our work, anyway? It is merely pointing a finger at jackasses and laughing. And today, we are spoiled for choice. Everywhere we look, we see one.

Let us begin on the front page of the prestigious International Herald Tribune.

â�,��"Americans and Israelis aim to undo Hamas vote,â�,� reads a headline. Isnâ�,��"�t this the same coalition that is pushing â�,��"democracyâ�,� and â�,��"freedomâ�,� throughout the world - at a cost of a trillion dollars, not to mention thousands of dead people? Werenâ�,��"�t we supposed to turn our faces up to the stars, after hearing the presidentâ�,��"�s State of the Union address, and reflect on how big a favor we were doing the rest of the planet...and how marvelously self-sacrificing we are to bring the wonders of democracy to woebegone outposts such as Afghanistan, Iraq, and Washington, DC?

Of course, it was just a bamboozlement. Nobody with any imagination or self-respect believes in mob rule, and no one would willingly accept the will of the people - unless it is on a matter of no consequence, such as the color of the flag or the selection of the national bird. Murder is murder and theft is theft...even if every member of the hit squad has a ballot in his hands. It is too bad the president didnâ�,��"�t say so in the first place.

But our beat is money, we remind ourselves. So, we turn our finger toward the worldâ�,��"�s moneymen for a few more chuckles. We find them lovable, too.

And here is our own new Fed chairman, Ben Bernanke. â�,��"What will he do?â�,� the papers ask

â�,��"Iâ�,��"�m buying bonds,â�,� said our hedge fund friend over lunch yesterday, â�,��"Because the American economy is definitely softening.â�,�

Evidence for a softening U.S. economy comes in the shape of a downward curve. It is the yield curve, now inverted, which means that a borrower can score cheaper money in the short term than they can in the long term. This doesnâ�,��"�t happen very often.

Normally the further out they lend, the more money lenders want - for the obvious reason that risks increase with time. The further you go out in time, the more likely something bad, something unpredictable, will happen.

But, if you believe todayâ�,��"�s yield curve, a miracle has happened. Time has started reducing risks! There may be an earthquake or a tornado tomorrow - the yields suggest - but certainly not over the next 30 years. Weâ�,��"�re laughing already and we may not stop any time soon.

And yet, there it is: you can borrow more cheaply for the short term than you can for the intermediate term...and more cheaply for the long term than for the intermediate term. Something is clearly out of whack. And normally, when that happens, a slump follows.

â�,��"Fed policy is too restrictive,â�,� say analysts. There is a â�,��"glut of savings,â�,� says Bernanke, frowning. All of the wanton saving is pushing down long rates at the very moment when the Fed is virtuously trying to push up short ones. Ergo, the upside-down yield curve.

Bill Bonner, with more views from London...

*** As we all know, Bush admonished the United States in his State of the Union Address, telling us that we were â�,��"addictedâ�,� to oil and we need to stop relying so heavily on the Middle East.

It turns out, next in line for the worldâ�,��"�s-biggest-producing oil field, after Saudi Arabiaâ�,��"�s Ghawar, is Mexicoâ�,��"�s Canatrell. Our neighbor to the southâ�,��"�s biggest oil field produces 2 million barrels of oil per day, or six out of every ten barrels produced by Mexico.

But, an internal study done by Petroleos Mexicanos, or PEMEX, details scenarios in which a decline of oil production would be likely.

The WSJ reports: â�,��"The worst two scenarios suggest a drastic decline in output to 875,000 barrels a day by the end of 2007 and to just 520,000 a day by the end of 2008. If such projections turn out to be correct, Mexico's overall oil exports would decline by about one million barrels a day - equal to about 63% of its daily crude exports to the U.S. - from its current 1.8 million.â�,�

â�,��"â�,�˜In my mind, this report suggests a collapse scenario is the most likely,â�,��"� says David Shields, an energy consultant in Mexico who first published the study's findings. Mr. Shields doubts Pemex can make up for lost output at Cantarell because it only discovers one new barrel of oil for every 14 it extracts at the moment, leading to falling reserves.â�,�

So, what does this mean for Mexico - and, in turn, the United States, since they are our No. 2 source of oil. We turn to our intrepid correspondent, Whiskey and Gunpowderâ�,��"�s Byron King, for some answers...

â�,��"The jungle drums out of PEMEX have been beating this tune for a while, but at low volume. There have been the proverbial â�,�˜unconfirmed reportsâ�,��"� and â�,�˜unnamed sourcesâ�,��"� within PEMEX who have been quoted as saying things like â�,�˜The Hubbert Curve is beginning to fit the oil production volumes of Mexico." Much of it was at the technical level, from the petroleum engineers and the mathematics-guys who do the Hubbert linearization work. But the bottom line is that the people with their hands on the actual equipment, and who measure the actual volumes, were saying that oil production and output from Mexico is about to enter into irreversible decline.

â�,��"The senior managers, and certainly the politicians, do not want to discuss the matter. They say things like â�,�˜We need to increase the exploration efforts,â�,��"� and all the usual feel-good bromides. Go ahead boys. Knock yourselves out. Drill in Mexico until the place looks like a pin cushion. You've found the biggest and best stuff first, as is always the case. Now you will find the smaller oil fields, at deeper depth, further in the outback or offshore, with lower quality oil.

â�,��"I guess we had better start getting to work, producing some of that â�,�˜ethanolâ�,��"� stuff that President Bush was talking about in the State of the Union speech. Yeah, that's it. Ethanol. Whew. Had me worried for a couple of minutes.â�,�

*** And wait - whatâ�,��"�s this? Stop worrying, dear reader...Bloomberg writer Matthew Lynn recently publishing an article heralding, â�,��"The Oil Crisis is Over.â�,�

Pfew. Thank goodness...we really dodged that bullet.

â�,��"Forget that order for a funny-looking electric car. Take the solar panels off the roof. Donâ�,��"�t worry about hoarding tinned food for the long economic slump that is about to engulf the world,â�,� starts the Bloomberg piece.

â�,��"Why? Because the oil crisis we were all concerned about less than a year ago is quietly going away...The laws of supply and demand are starting restore market clam. They suggest that although oil isnâ�,��"�t about to get really cheap, talk of $100 a barrel can now be put to rest.â�,�

â�,��"When I saw that headline,â�,� Byron said to us of the article, â�,��"I thought he was kidding. But no, this Bloomberg-man is serious.

â�,��"This is EXACTLY why amateurs should not fool around with issues of Peak Oil. They confuse their readers with rah-rah bromides, and will cause people to hurt themselves. These types of party-hardy cheerleaders idealize the workings of the so-called â�,�˜free marketâ�,��"� (dollar-denominated, so how â�,�˜freeâ�,��"� can it be?), while ignoring the inexorable march of resource depletion and the irreversible decline in future amounts of available liquid fuels. They confuse a temporary market retreat with the equivalent of the Russians defeating the Germans at Stalingrad, and mark an otherwise minor trading event as the start of the end of the Great War.

â�,��"But of Peak Oil, allow me to paraphrase Churchill after El Alamein, â�,�˜This is not the end, nor the beginning of the end. This is not even the end of the beginning.â�,��"�â�,�

*** Meanwhile, the Financial Times gives us another hearty little chuckle, when it explains that the Bush administration, while trying to â�,��"undoâ�,� democracy, is also trying to undo Chinaâ�,��"�s new currency peg. The Chinese are edging up toward $1 trillion in foreign reserves this year - money that comes largely from America. U.S. officials blame the Chinese. Why, in China, one person told the FT, â�,��"Saving is encouraged!â�,�

Oh, be still our beating hearts! What savage thing will they be doing next? Encouraging chastity? Charity? Probity?

What amazes us is that there are so many jackasses...so many public officials...so many politicians...so many economists - all making our lives more entertaining and our work easier.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.