Suddenly, the question marks are back. Such as: how much is that in Polish zloty?

The trouble with the financial world is that nothing stands still. We read in today’s paper that houses in the United Kingdom are down for the second month in a row. During the housing bubble, British housing rose even more than in the United States; it probably has a lot further to go down.

But, what’s this? Measured in gold, housing in the U.K. has been going down for the last three years!

Let’s see, if you measured U.S. housing in gold, the average house probably cost about 650 ounces in ‘97. Now, the same house costs only about 500 ounces.

And measured in euros (EUR), the average U.S. house cost about 250,000 in ‘98. Now, even after doubling in dollar terms, it costs only about 275,000 euros. After the costs of maintenance and taxes, the homeowner has lost ground. But what do you care what your house is worth in euros or gold?

“Wall Street and dollar take another beating,” is the headline in the Times of London this morning.

Colleague Steve Sjuggerud forwarded a chart showing that real estate declines and bear markets on Wall Street always come together. “It’s only a matter of time.” says Steve.

Hold that thought, dear reader. And don’t worry. In today’s Daily Reckoning, we will clarify things. After a very long time when things seemed so very sure...

...when everyone knew the U.S. of A. had the world’s most dynamic, most profitable, and most secure economy, when property prices were clearly going up, when there was definitely a bull market in stocks...

...suddenly, the question marks are back:

...what is the meaning of the credit crunch ?

...is Bernanke fighting inflation, or fighting deflation ?

...are stocks going up? How about the dollar? Is gold hitting another peak?

...and what is ANYTHING worth, when EVERYTHING floats on a bubbly sea of shifting exchange rates?

Relax. Most of these questions are unanswerable so don’t trouble yourself with them. Instead, let us look at a few things that don’t float. Let’s go back to the eternal verities, the North Star for investors.

There are a few things you can count on. Stocks always go down. Paper money always loses its value. Government always lies.

First, let’s look again at the dollar.

A couple of years ago, we dared to guess that the greenback would hit $1.50 to the euro. At the time, everyone thought the dollar would go down. Even Warren Buffett, who doesn’t like speculation of any sort, was betting against the dollar.

It seemed too easy. Too obvious. Markets don’t usually work that way. People rarely get what they expect, because what they expect is already reflected in current prices. Instead, markets usually surprise us.

How would the dollar surprise us, we wondered?

Either it would not fall or it would fall much more than people expected. We guessed it was the latter. And so, it is turning out to be. Oil is already getting friendly with $100. Gold is getting very close to meeting up with its highest level ever – $850. And the euro is trading over $1.47.

Can you count on the dollar losing more value? Yes, you can. The dollar is the I.O.U. of the USA, a nation more deeply in debt than any has ever been. It’s a cinch to go down; Central banks around the world are turning to other currencies to stock their vaults. Celebrity models are demanding payment in euros. Investors are getting interested in gold.

But exactly how, when, and against what will the dollar decline? Oh dear reader, you’re asking too much.

But here’s another verity:

America’s middle class is getting squeezed.

“Homeowners Feeling Pinch of Lost Equity,” says the New York Times.

Diesel fuel and heating fuel are both selling for more than $3 a gallon.

And the Boston Herald reports that appraisers are now killing housing sales. They give their opinions just as they did before. But now, their appraisals are not high enough to get mortgage financing.

And now Ben Bernanke is warning of inflation. Hmmm... He told Congress yesterday that higher energy and higher import prices “put renewed upward pressure on inflation.”

What he meant to say was that he and his colleagues were destroying the value of the dollar and people were beginning to notice.

Then, he went on with the remarkable line:

“We are going to make sure that the inflationary impact that may come from a weakening dollar is not passed into broader prices.”

How is he going to do that? If the dollar goes down, it will take more dollars to buy things. That’s what inflation is. Can you have inflation without rising prices; can you have a falling dollar in which the dollar doesn’t fall? Mr. Bernanke did not venture into the metaphysics of it. Instead, he left the false impression that he and his sidekicks at the Fed were going to catch the buck in mid-air. Ha! They’re not going to catch it at all. They’re going to let it fall. We remember Paul Volcker; and Ben Bernanke is no Paul Volcker.

And so, dear reader, the story is getting more and more interesting.

The financial industry is sitting on something between $100 billion and $500 billion of as-yet-undisclosed losses. The Financial Times says the “crisis will get worse before it gets better.”

About 2 million American homeowners are set to lose their homes.

The dollar has already lost 10% of its value against other major currencies so far this year.

Americans’ most important asset – residential property – is going down at nearly 5% per year. Since property prices are in dollars, in world terms, the householder is losing about 15% per year. And yes, dear reader, housing will keep going down. There’s another thing you can count on. The typical family doesn’t earn enough money to buy the typical house. Either family incomes must rise, or housing prices will fall. Which will it be?

Which is more likely? Here, we’ll take a wild guess – uh...housing prices will fall.

And now, dear reader, here comes the other shoe, the drop in stock prices. Yesterday, the Dow was off a few points. It was down 360 points the day before. If this presages a general collapse in share prices, it means that ALL major forms of wealth and savings are in decline for Americans. Housing, stocks, even money in the bank.

The only things that are not going down are the cost of living, and gold.

Ben Bernanke implied that the Fed would not be lowering rates again, not any time soon. He’s not going to allow the cost of living to get out of control, he says. But if stocks slide, what else can he do?

One way or t’other, stocks are going down. Because real estate is going down. And because profits are going down. Profit margins are high now, for reasons we’ve explained in these Daily Reckonings. But profits never stay this high for long. They always regress to the mean. Besides, the growth in profits has come from financial activities, not manufacturing. Finance is peaking out. Wall Street itself is selling off. Goldman (NYSE:GS), Merrill (NYSE:MER), Morgan Stanley (NYSE:MS); these dogs have had their day. Now, they’re on their way down, and so are business profits, generally and so are stocks.

Want some other sure things?

The middle class is sinking. Houses are going down. Stocks are going down. Isn’t that enough?

Okay, how about this: inflation, worldwide, is picking up. There are many more people with much more money in their pockets than there were a few years ago. Wages are rising in the East. Prices for basic materials and food are soaring. Soon, the asset inflation we’ve seen over the past few years will give way to consumer price inflation. Not just in the United States, but worldwide.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.