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As we now proceed to a much more problematic phase of a runaway global boom, analysts and market operators are being forced to begin reexamining previous assumptions. Instead of the placid inflation and interest rate environment anticipated by the consensus, there is this highly inflationary global Credit and liquidity backdrop requiring higher market yields and tighter Financial Conditions than would have otherwise been the case. Or, stated differently, the Structural Increase in Global Credit Availability and Marketplace Liquidity will necessitate tighter-than-anticipated monetary policies by global central bankers - in particular the Federal Reserve.

Until some development impedes the global Credit boom, monetary policy will be dictated more by the need to lean against loose Credit Conditions and Global Liquidity than any by any measure or index of consumer prices. How ironic that this circumstance revealed itself as the leading proponent of "inflation targeting" was assuming the helm of the Federal Reserve System.

The increasing awareness by holders of inflating quantities of suspect (dollar) Credit instruments that they are being shortchanged should weigh on U.S. markets, and keep in mind that strong U.S. markets have provided major support for our faltering currency. And as the Bubble’s inequitable (re)distribution of wealth gains greater recognition, the strains between the "haves" and the "have nots" – between debtor and creditor – between the U.S. and its highly liquefied competitors for global resources - will surely intensify. The global grab for limited resources should be expected to at some point turn more hostile, providing greater incentive for the U.S. to inflate and for others to aggressively exchange dollar liquidity for more attractive stores of wealth/value.

Doug Noland is a market strategist at Prudent Bear Funds. Their website is www.prudentbear.com.