Financial markets didn't wait for the smoke to clear from the Dubai debt crisis before jumping back into the happy days of shorting the dollar and piling into everything else. After the massive government bailouts in the last crisis, the markets don't have any doubt that there would be bailouts the next time. This no-downside psychology is making each market correction shorter and shallower.

The zero-interest rate environment and rapid monetary growth are scaring conservative savers into becoming budding speculators. By threatening to destroy the value of cash and by subsidizing speculation with low interest rates and bailouts, good guys really finish last. It may be better surfing the speculative waves than staying put. One may die in a speculative crash, but holding onto cash when governments are hell-bent on printing money to solve every problem seems like certain death.

The Dubai crisis wasn't even the most important event last month. The confirmation of Ben Bernan ...

...e thrown trillions of dollars towards preventing necessary economic adjustments, believing that stimulus will bring back growth. The money is buying some time, but the costs are (1) that the governments won't have enough money to cushion the pain during the coming economic restructuring and (2) that inflation will increase misery in an economic downturn.

The whole world is drinking poison to quench its thirst. It may feel like relief now, but the sickness will strike in 2012.