We are on vacation.

And so is the rest of France. The little church was crowed yesterday, mostly with Parisians and their children. It was also the 50th wedding anniversary for a friend...a retired army colonel and his wife. But the occasion was marked by more sadness than joy. Only three weeks ago, one of their sons was killed in a traffic accident. We felt so sorry for him; we didn’t know what to say. We wished he could worry about the stock market...or the monetary system...or the war in South Ossetia – but it was all no more than the buzzing of a fly compared to the loss of a child. We were meant to celebrate their golden wedding anniversary, but who could offer more than empty words?

“Oui, mon vieux...yes, my poor old fellow,” was all we could say. We hugged him and said nothing more.

Yes, we are on vacation...but this is The Daily Reckoning , after all. And there are always things to be reckoned with. Some important. Some trivial. Some sacred. Some profane.

But come 1PM, the lunch bell is going to sound and stand up from our computer and not touch it again until tomorrow. Then, after lunch, we’ll round up our crew of involuntary workers – three boys – and get to work. We have about 125 shutters in need of scraping and painting.

“Hey Dad, why do we have to do this? I mean, other people take a real vacation...I just spent the week with Paul and his family. They were really on vacation... and we just work.”

Henry also did some calculations: “Besides, if you add up all the expense of maintaining this place, it would probably be cheaper for us to take a vacation somewhere else...somewhere where somebody else paints the shutters...”

You’ll find our reply below...but first, we have the trivial world of finance to deal with.

Not that we have much to say about it. Yesterday, the Dow rose 302 points. The price of oil fell $5, to $115. After so many weeks of stormy, bearish, depressing news...it was time for a little blue sky and sunlight.

Stock markets all over the world are on the rise. Even financial stocks...and automakers...and airlines – all seem to be recovering.

One major exception – China. The Shanghai index fell more than 4% on Friday...and is still falling this morning.

But outside Shanghai, the word on the street is that “the worst is over.” They liken this to the ’70s, noting that after inflation peaked out, stocks rose strongly, and gold collapsed. In fact, the period – 1982-2000 – was probably the most agreeable financial period in most peoples’ lives. The Dow rose 11 times, while gold fell to less than a third of its peak. Interest rates went down in fits and starts over the entire period, not reaching a bottom until 2003. What could be better? Assets rose in price...while the cost of borrowing fell. This was the era of globablization, free trade agreements, cheap shipping costs, the entry of China and other nations into the world market system, Wal-Mart, technology and just-in-time inventory – all of these things helped to lower the cost of many manufactured goods. What a great time to be an investor!

But Daily Reckoners are warned: the stock market didn’t take off until stocks had been beaten down to very low prices – with P/E ratios of 5 to 8 (currently, they’re 14-18). Bonds didn’t take off until yields had peaked out over 15% (currently the 10-year note yields 3.95%). Which is another way of saying...the cost of borrowing didn’t go down until it had become almost impossible to borrow. And inflation rates didn’t retreat until they had hit 14% annually.

The moral of this story is simple enough. You have to fall down before you can pick yourself up.

Another big story in the financial press this morning has the dollar as its hero. The greenback rose three full pennies against the euro on Friday. It now stands at $1.50 per euro. Yes, the dollar is coming back too – or so you might think.

As to the dollar/euro exchange rate, we have no prediction to make. It’s like a spelling Bee where both contestants are dyslexics. Neither the euro’s masters nor Ben Benanke can spell “sound money.” The European central bank lends at twice the rate of interest of the Fed. But the Europeans are expanding their money supply faster.

Compared to dollars and euros, gold is a Webster’s Unabridged Dictionary. Every word is spelled perfectly. Our guess is that both dollars and euros will lose ground against gold. Here too, many commentators think the top in gold has come and gone. It’s down nearly 15% from its near-term peak. But again, it appears to us – and maybe to us alone – that the ‘70s-style trends have yet to run their course. Stocks still have to be crushed. Inflation still has to reach higher than an official rate of only 5%. Yields have to reach higher than 4%.

And the monetary system rigged-up by the Nixon Administration in ’71 still has to fall into ruin.

*** “Oil rises on troubles in Georgia...”

The headline is a sign of our time. Today, the world believes in money. In economics. In material progress. Everything else takes second, third, or fourth place. It is easier to see small changes in the price of oil than big changes in the way you look at the world. You can tell when the world changes; but when you change it goes unnoticed.

If this were August 1914, instead of August 2008, the headlines might read:

“French Bonds Fall on Invasion of Belgium.” Or, if this were August of 1939, the headline might read: “Oil prices jump on threatened German invasion of Poland.”

Or how would the modern press report the big event of 2000 years ago? “Miracle worker’s earnings cut short by untimely crucifixion...”

But in years zero, ’14 and ’39, money was not the main issue. People believed in politics, nationalism, racism, religion...and reported the news otherwise.

Today, it is money that counts.

The price of oil fell heavily last week. It ended Friday at $115. But this morning, it is rising – on news of a political struggle in South Ossetia. And if this continues, we wouldn’t count on the price of oil to stay ‘low’ for long. The only good news is that when energy is under the gun, the soaring oil price itself opens you up to all kinds of soaring investments.

The region is between Russia and Georgia, on the Black Sea. Ossetians, whoever they are, have been there since the days when the ancient Greeks set up colonies around the Black Sea. In the 1930s, the Pontic Greeks were still there – until Stalin deported them to Kazakhstan. The Ossetians, too, disappeared into the maul of the Soviet Union. They were forgotten for most of the 20th century. Then, when the Soviet Union disbanded – there they were. But who then had the right to tell the Ossetians what to do? The Russians? Or the Georgians? The Russians expressed themselves on the issue over the weekend. According to one report, 2,000 people have died in the fighting.

U.S. Vice President, Dick Cheney, had Georgia on his mind over the weekend. He reportedly said that this violence “must not go unanswered.” What sort of response he had in mind, we don’t know. But inasmuch as the United States and Russia are the world’s two most heavily armed nuclear powers, there may be more at stake than the price of oil.

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