As you remember, dear reader, we decided to hoist our old, tattered “Crash Alert” flag up last week. About mid-week, as we recall.

Not that we had any inside information. Mr. Market doesn’t talk to us directly. We just read the papers – just like everyone else.

But what we noticed last week was that the Fed had given stocks, bonds commodities, and gold the biggest push in recorded history…$600 billion was coming into the market. It was long. It was going to stay long. And if it didn’t do the job…there was plenty more where that came from.

Plenty more. Because this money came from nowhere. And if you can get money out of nowhere…you can get a lot of it.

In effect, Ben Bernanke gave the market the Mother of All Puts. Stocks go down? Put them to the Fed. They’ll buy anything.

Yes, Mr. Bernanke is trying to give “risk on” investors a put – protecting them from the downside by adding more and more money. No, investors are not sure this plan is really going to do them any good. The stock market went up only very briefly on the day following Mr. Bernanke’s announcement. Then, there was no follow-through.

All very well to get hot and bothered speculating on the fall of the dollar (and the rise of everything else). But there is something so desperate and foolhardy in Mr. Bernanke’s money-printing, it just doesn’t feel right. It feels more like something a banana republic would do.

A New York Times article last week compared the US to a Banana Republic. It pointed out that the rich have gotten a lot richer than the poor. A pity. The author – Nicholas Kristof – missed the point completely. He thinks he knows how much people should earn and believes the difference in income – in itself – is the problem.

The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.

C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.

At a time of 9.6 percent unemployment, wouldn’t it make more sense to finance a jobs program? For example, the money could be used to avoid laying off teachers and undermining American schools.

Likewise, an obvious priority in the worst economic downturn in 70 years should be to extend unemployment insurance benefits, some of which will be curtailed soon unless Congress renews them. Or there’s the Trade Adjustment Assistance program, which helps train and support workers who have lost their jobs because of foreign trade. It will no longer apply to service workers after Jan. 1, unless Congress intervenes.

So we face a choice. Is our economic priority the jobless, or is it zillionaires?

To me, we’ve reached a banana republic point where our inequality has become both economically unhealthy and morally repugnant.

This is typical. The guy doesn’t bother even to wonder why the rich are so rich. He just knows he doesn’t like it. So he’s calling on the politicians to DO SOMETHING about it! Tax the rich bastards. Give more money to the poor. Redistribute income.

He gives some lame reasons why income redistribution would be a good idea for the economy…

How does he know how much people should earn? Of course, he doesn’t. It’s just a matter of taste. Where you sit determines where you stand. If you’re rich, you probably like the fact that the rich have so much money. If you’re not rich, you probably don’t.

But let’s stick to our point. The US is doing something that usually only banana republics do. The central bank is encouraging speculation. Oh, by the way… Who speculates? Is it the poor? The middle classes? The working stiffs?

No? It’s the speculators, right? The rich, in other words, are the guys who can get money at ultra-low interest rates from the Fed (directly or indirectly) and use it to speculate on say, cotton (up almost 100% this year) or Chinese stocks.

Let’s see, how does that work again? Oh yes… The Fed gives out money to the financial elite…the rich… And then the know-nothing journalists at The New York Times want the feds to redistribute the wealth. Why not just turn off the Fed? No, that would be too simple and too honest.

But back to the Fed. It’s just given the elite a huge wad of cash…and a promise that it will put up more cash, if necessary…

…and yet, stocks did NOT go up much. Something is wrong. That’s why we raised the “Crash Alert” flag. It is as if this market wanted to go down – no matter what the Fed was doing. Or maybe it didn’t trust the Fed. Or maybe investors figured that acting like a banana republic was not really good for stock prices.

Friday, we got a big sell-off…with the Dow down 90 points and gold off $35.

We don’t like the looks of it. So, turn your head upwards a bit. See our “Crash Alert” flag a-fluttering. And get out of all risky investments…

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