I know we are all ticked off by AIG giving out bonuses to employees. True, AIG behaved in a reckless and ridiculous manner, clearly highlighting the vast gulf between the mindset of some American financial executives still living in the Land of Make-Believe and the rest of us living in the disorienting Land of Recession. But really. A retroactive tax?  As Senator Judd Gregg stated on Friday, it is wrong “to propose to use the taxing authority of the government in a manner that is arbitrary, punitive, and targeted on a single group of people.” I also like John Stewart’s description on Thursday’s Daily Show, “Congress got together and opened up a can of dumbass.” The people who rode along with the Bush Administration, helping to dismantle meaningful financial regulation, now want to create “smart bomb” tax policy. Good luck with that!

What does matter?  What should we be watching, besides a congress that seems to believe we elected them to entertain us with bureaucratic pratfalls? When the news is full of nonsense, I want to know what I’m not looking at that I should be looking at. If you want to keep an eye on the economy, here are three real issues that we need to be aware of as we move into a new phase of the economic crisis:

Inflation: At some point we all need to take a deep breath and thank our government for what they have done right: by strongly responding to the financial crisis with $3 trillion or so of economic aid, a much worse economic disaster may have been averted. But pumping $3 trillion dollars into our economy has many affects, not all good. Adding cash into our economy may have stimulated banking, but at some point it’s going to create inflation. Chairman Bernanke has said repeatedly that he is ready to pull that money out when needed, but I’m not sure it will be that easy. The month of March has seen the value of the dollar drop against other currencies, including 7.8% against the Euro. Reuters News reported that the Consumer Price Index (a measure of inflation in the United States) rose 0.4 percent in February.  Not much, but the biggest monthly gain since last July. We need to keep an eye on the beginning of a possible trend. A rapid increase in inflation means that everything we buy becomes more expensive. The normal response is for the Fed to raise interest rates, which can again slow the credit markets as borrowing becomes more expensive. Rapid inflation could trigger the next economic mess for the US.

The cost of oil: Tied to inflation is the cost of oil. Remember expensive oil? Gas over $4.00 a gallon? People ditching their SUV’s like AIG bonuses? At some point, those days will return. Oil is a very limited resource, with supply under great strain when the global economy is functioning normally. While we have a bit of a hedge in consumption due to the economic slowdown, nations that have economies dependent on cash for oil are eager to see the price go up again. This week, OPEC kept production steady, in hope of not spooking the global economy. But as soon as things pick up, OPEC policy will switch to pushing the price per barrel up near where it had been. Expensive oil is now a fact of life. We are enjoying one benefit of a global economic meltdown: as economies sag, the use of oil goes down, which pushes down oil prices. Not for long. Expensive oil could fuel inflation, raise prices of manufacturing and transport, and create a new hurdle for the American economy.

Developing nations’ manufacturing declines: The global economic crisis is a progressive series of events. America starts the process, so economic contractions are felt here first. But as time moves along, so does the crisis. Just like the talk of the crisis moving “from Wall Street to Main Street,” the crisis is now moving from “American Main Street to Indian Main Street.” One way to watch the process is by keeping track of manufacturing in other countries.  While American manufacturing has declined about 11% since 2007, European production has declined 12%, and Japanese production has declined 31%.  That’s the first wave. According to Heather Trimmons for the New York Times, Indian manufacturing has declined for the quarter for the first time in ten years. Since last April, handicraft production (a low-tech staple of the Indian economy) had declined 55%. In China, exports have fallen 25%, resulting in millions of lost jobs. These declines are much more meaningful in the developing world than in the West. When an Indian leather worker loses his job, there is no place to go for an unemployment check and retraining. Ultimately, declining manufacturing in other nations can create the context for populist political movements and a destabilized global environment.

So keep your eye on the ball, not what’s on CNN. While reactions to AIG may make good television, they mean very little in the big picture.