It looks like the bank rescue plan is going to work! Yay! Happy days are here again! This was the shortest Great Depression on record, lasting only three days, from Black Friday (October 10th, 2008) to Happy Mondays! (October 13th, 2008). After the DJIA lost over 50% of its value from its peak over the summer, it gained back 11% on Monday, and if the DJIA follows other world wide indexes today it stands to be back at 14,000 by Christmas.

Some Debby Downers are already saying this looks like a classic “Bear Market Bounce”. They say that — markets be damned — until Americans feel enough pain to make them give up their profligate, spendthrift ways the same mindset that brought us the problem will create new and unforseen problems.

But one thing is for sure, government intervention in global capital has never been this big in the entire history of the world. Whatever the new problems are, they won’t look like your grandparents’ problems. There probably won’t be bread lines in Manhattan (thank God!), nor will there be runs on the banks as frightened citizens desperately try to get greenbacks out of battered ATMs.

I’m gonna play Nostradamus here, and predict that the new problems will have less to do with the money supply (a problem the government has found an elegant solution for) and more to do with inflation. Bad debts are inescapable, as is the hangover they produce. It’s just a feature of overproduction and speculation. They must still work their way through global economies. But people won’t lose their cash. Instead the brand new, guaranteed bills governments all over the world are creating to make sure there is still money in your purse will loose their value when it becomes apparent that they aren’t redeemable for real work. (That’s what happens when people default on their debts — you can’t get the work they promised out of them.) How they deal with 2009’s inflation will be something to see.

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