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The markets are going crazy. On Monday, the Dow-Jones in New York rose more than 200 points to its highest level in 13 months. Gold is more expensive than at any other time in history; the dollar continues to weaken and is almost at the level it was when the great financial crisis began last year. Dealers for banks and hedge funds are buying stocks and commodities as if they think a boom is imminent. They’re buying gold as if they feel they have to protect themselves from inflation and they’re selling dollars as though they expect interest rates in America to stay at zero forever.
None of this has anything to do with reality. American unemployment is rising faster than had been feared, meaning the next recovery will be far weaker than normal. Factories stand empty and payrolls are falling – both strong indicators for coming inflation. And of course it’s also clear that the dollar can’t keep sinking forever and that interest rates in the United States will have to rise again.
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The banking crisis has by no means been resolved. In Germany, the Bavarian State Bank has reported new losses amounting to billions of euros; in the United States, officials closed five banks on Friday to keep them from total collapse, an action hardly noticed by the public.
