"Let's turn on some music…" said Brian, one sultry night in 1966.

We were far from legal drinking age, but there were plenty of saloonkeepers who didn't seem to care. One ran a bar named "Mickey's"…a rickety dive built on stilts. Beneath it, the salt water splashed against abandoned automobile tires and washed up beer cans into the reeds and bushes on the shore. We were 18 years old, just graduating from high school, and vaguely wondering what to do next. And if we didn't think of something fast, the U.S. Army would come looking for us.

After trolling the airwaves for a minute, we found what we were looking for:

"When a man loves a woman…can't keep his mind on nuthin' else…"

"You can't beat Percy Sledge," said our friend.

"No, you can't beat Percy," we replied.

"…he'd turn his back on his best friend, if he put her down," Percy continued in the background.

"What are you going to do?" Brian asked.

"I'm going to college. I got a scholarship, remember? What else can you do? Otherwise, you'll get drafted…besides, I thought you were going too."

"Nah…my mother is on my case about it all the time. But I don't want to go. I don't see the point. I like it here. I went to look at UVA, but I don't like preppies. And I didn't like the smell of the place. I like the smell of this place. It's where I like being. I'm just going to keep planting tobacco and hanging out at Mickey's."

"Don't you want to make some money…get ahead in life?"

Percy over the radi "…he'd give up all his comforts, sleep out in the rain…if she says that's the way it oughta be…"

"What are you talking about? I already make more money raising tobacco than these jumped up college graduates make in their office jobs. And I'm outdoors doing what I like doing. I can stop and drink a beer whenever I want. Nobody tells me what to do. And besides, I don't want to leave Dottie…"

"Yeah, but they're going to draft you…"

"Well, I'm not worried about it. My brother is already over there, in Vietnam. He says it's not so bad…at least where he is."

We never saw our friend again. He was killed in a bar fight at Mickey's a few months later. Another friend hit him in the head with a pool stick. He fell to the floor; got up; started drinking again and then collapsed. The tobacco economy disappeared soon after, too. And long gone are the days when a farmer in Southern Maryland didn't have people telling him what to do. Now, every one of them must have a dozen inspectors and regulators looking over his shoulder.

That world of the '60s is no more. But last night…a part of it came back, almost better than ever - Percy himself. (About which…more below…)

Meanwhile, investors turned a whiter shade of pale yesterday, as the Dow dropped another 166 points…oil rose $3 to a new high of $144…the commodities index, the CRB, hit a new record high of 614.

It was not a very rewarding day for investors…and it comes hard on the heels of what has been one of the worst six months on record. As measured by the MSCI world index, investors have not taken such a beating in 26 years.

The Royal Bank of Scotland has a "crash alert" warning out. And the European Central bank threatens to raise rates. Jean-Claude Trichet says there's a risk of "exploding prices" as the rate of producer price inflation in Europe reaches a record high.

Already, the U.S. key lending rate is only half the ECB rate. Already, the dollar seems to holding on by its fingernails. If the ECB raises rates again, the dollar could be kicked off its narrow ledge.

We have been trying to figure out the queer dynamics of current central banking policy. So far, all we've been able to figure out is that it is more perverse and more complicated than we thought.

In a nutshell, it is obvious now to everyone that the world economy is going in two directions at once. Consumer prices are going up - as if there were a boom going on. Asset prices, lending, IPOs, and consumer confidence are all going down - as if there were a bust.

Yesterday brought news that "consumer delinquencies are rising." Overdue home equity lines recently increased at their fastest pace since 1987, says the American Bankers Association.

Car sales are at a 10-year low. And SUV owners are getting "burned twice," says a news item. Not only do they pay far more for gasoline than they expected to…now, when they go to trade in their tanks for a more modest form of transportation, they get less for it than they had hoped. Who wants an SUV today?

But think you've got it bad? Think again. Inflation in the Ukraine is running at 30% per year. In Latvia, it's 18%. Egypt is suffering 16% inflation. And, oh yes…there's Zimbabwe. The average worker's salary in Zimbabwe is 15 billion Zimbabwe dollars per month. The poor fellows are billionaires, every one of them. But it takes 19 billion Zimbabwe dollars just to buy a pack of 10 cookies - if you find it. A pound of margarine is 25 billion.

Consumers are getting shellacked all over the world. So are investors. Europe's stock markets are down nearly twice as much as Wall Street. And many foreign markets are down twice as much. China and Vietnam, for example, are both down more than 50% from their peaks.

And poor Japan! The world's second largest economy can't seem to get a break. The Nikkei Dow is having its "longest losing streak in 43 years," says today's financial news.

Readers will not let us forget that we've been a little sweet on Japanese stocks. Not because we think they will necessarily go up; we just feel sorry for them. Where else can you find a market where stocks have been going mostly downhill for the last 18 years? Where else can you find a place where consumers prefer to leave their wallets closed and save their money…expecting prices to go down, not up?

In fact, this bout of global inflation may actually be good for Japan, says Christopher Wood. Finally, prices are rising. Core inflation is at its highest level in 10 years. Who knows? Maybe the Japanese will begin spending again…and maybe even borrowing?

MoneyWeek Magazine also points out that Japanese banks are actually solvent. "Unlike their western peers, [Japanese banks] have the money available to lend."

We'll stick with our fondness for Japanese stocks…at least for now.

*** Adding to our nostalgic mood this morning is an item on Richard Russell's website, showing how much prices have risen since 1967. Crude oil, for example, is 45 times more expensive. Gold is 25 times more costly. Houses have gone up 12-fold. Stocks are up (as measured by the S&P) 15 times.

But here's the crushing news: according to his figures both consumer prices, generally, and incomes are up exactly the same amount - 7 times.

In other words, the typical American makes not a dime more today - adjusted to the official consumer price index - than he did when we graduated from high school. That's 40 years without a single step in the right direction.

*** What's a poor central banker to do? He expects the economic slump to reduce prices. Maybe he should stimulate the economy to offset it? But prices are rising, not falling. Maybe he should raise rates to head off inflation? But won't that make the slump worse?

A growing mob of kibitzers tells central bankers that it is time to raise rates in order to bring worldwide inflation under control. But what central banker wants to raise rates significantly when unemployment is rising and growth is slowing? None.

We're still waiting for someone to call our "Hotline." You remember, dear reader, we're ready to offer advice to central bankers…any time, day or night. No charge. But so far, the phone has been silent; we presume it is Ben Bernanke who hasn't called.

When the call comes in, though, we're ready: "Raise rates," we will tell him.

"How will that help things," he will ask. "Isn't the country in danger of sinking into a Japan-like recession?"

"No, don't worry about that…the situation is different. The Japanese had savings. They had a positive trade balance. They didn't have subprime mortgages and didn't owe the rest of the world trillions of dollars. They didn't have 10 million people on the edge of bankruptcy. And they didn't have a $600 million military budget or a war in Iraq to pay for. The situation in America is much worse than it was in Japan. Japan could afford a slump…America cannot."

"Then why do you tell me to raise rates?"

"Real rates are going up anyway…that's what happens when you get to the credit contraction phase. So you might as well put them up. Besides, we just want to see what will happen."

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