As John Gruber analyzes the latest iPhone rumors, I’ll build on his description of a “new, lower-priced, smaller, and more adorable iPhone” with some baseless speculation:

I think the iPhone Lite will simplify the iPhone’s overly complex one-button interface — it’ll have no buttons, and no microphone or speaker. It will require the use of a headset, and Apple will introduce a new Bluetooth headset with volume controls to accompany it.

Take an iPhone, remove the button on the front, the internal speaker, the microphone, the volume controls and maybe the camera, and you’re left with a device about the size of a credit card and the thickness of the new iPod Shuffle. The most popular carrying case doubles as a bifold wallet.