What's Going On?

We shared this apple last week, the one and only apple we harvested from our two Red Delicious trees. Let's say it was anti-climactic.

Yesterday the markets shot upward dramatically. Do you know why? Do you care? You should because what is happening, with greater speed each and every day, will determine your immediate future.

We all know about the crisis in Euro country, and what happened yesterday, boosted the confidence of the markets because the perception is that a solution is afoot. The world's most stable currency and economy, that of the USA has intervened.* They are going to print a ton of money to help stabalize the Euro crisis. Of course, they do not call it what it is, printing money, the call it 'swapping', or 'easing', or 'recapitalizing' or 'saving us from the abyss' or 'bolstering financial markets'.

A bit of background is in order here. After the second world war, a prominent economist, John Maynard Keynes, proposed a global paper currency regulated by a central bank. Sound almost biblical, does it not? His plan did not fly, but out of the idea there arose the IMF (International Monetary Fund) and the World Bank. These institutions became nothing more than administrators of welfare payments to impoverished nations. But, the dream did not die.

The economies of the nations have long been lead by Keynesians, those who believe that the market by itself cannot create stability in the economy, but things such as interest rates and money supply, and inflation and deflation, manipulated by government, bring about a sound economy. The goals and dream of Keynes lives on and the creation of the Euro and its central bank were a step in that direction. This 'dream' has not yet been instituted because there has not, to this point, been a financial crisis of great enough proprotion to warrant such a thing.

Ben Bernanke, the head of the US Fed, is a dyed in the wool Keynsian and has unlimited faith in the magical powers of the US paper currency. The US has been interventionist, militarily, throughout the world, and now they feel it is in everyone's best interest that they interfere monetarily. And Ben has no qualms about fighting a debt crisis with more debt. If this latest move creates rampant global inflation, there is your crisis that will push us to a world currency.

This whole scenario is playing out very rapidly. Only two days ago, the markets fell dramatically because it was widely known that credit was drying up in Europe. Now a huge turnaround with the influx of US dollars. Mr. Bernanke has become the loans manager for the entire world. This is scarey because he does not know what he is doing. Or does he?

*Actually, the USA is, in some ways, in much more serious trouble than its European counterparts. It is the blind leading the blind.