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In the context of a Credit system remaining stubbornly overheated in the face of a cooling U.S. housing market, a powerful inflationary bias in an arena of such potential enormity (energy/energy-related) is quite significant. Credit Inflation/Bubbles innately expand and nurture fledgling Bubbles to support and perhaps even supplant the aged. An appreciation of this dynamic is today analytically invaluable. It is exactly this dynamic that leaves me skeptical of the notion that the Goldilocks economy will duly cooperate; that the timorous Fed can painlessly wrap things up; and that the scrawny bond bear has had his fill.

And while I keep an open mind to possible intermediate and long-term developments, the current environment is inarguably inflationary…..

Today, I would strongly argue that the U.S. domestic economy and the general global economy are enveloped by Credit Bubble Influences and Dynamics. Most importantly, this infers powerful propensities toward ongoing Credit excess, heightened inflationary pressures, unwieldy speculation, and maladjusted economic expansion. Credit systems and economies that have attained marked momentum will be restrained only by a significant tightening of financial conditions – today either by concerted and aggressive central bank rate increases and/or financial dislocation. Current market yields are not sufficiently restrictive and become only less so as bonds rally to the idea of the end of the Fed "tightening" cycle.

That bond markets seem so willing to dismiss the possibility on an intransigent global inflationary boom has me rather fascinated. I would suggest, however, that any decline in market yields at this point plays right into the hands of ongoing Credit Inflation and Problematic Excess (not to mention $80 crude!). And whether it is willing to accept the responsibility or not, it appears it will be the bond market that must at some point wrest power away from the brutish inflationary boom. This is not the ‘90’s; there’s no slack left in global resource markets; $800 billion Current Account Deficits are a disaster in the making; dollar prospects are a serious global issue; and this synchronized global boom has "trouble" written all over it. And that’s about as Concise as I get.

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