We’re staying at the Peace Hotel in Shanghai. It’s a beautiful art-deco building right on the Bund. We left the hotel last night and had dinner a few blocks north of here. When we saw Shanghai’s skyline, across the river…it took our breath away.

“This must be a city of the future,” said Jules. “You kind of expect a flying car to appear – like on The Jetsons.”

Everything is lit up – including the boats going up and down the river.

In comparison, Paris is dull and predictable. New York is boring and worn-out. The view along the river reminded us most of London. It lights up its buildings. You get the same sort of view across the river. And London has some strikingly new and exciting buildings too.

But compared to Shanghai, London is small…and slow-moving. It is in the ‘old world.’ This seems like the new world.

Shanghai is not cheap. Dinner for a group of six, at a not-too-fancy joint on the Bund set us back $900. The hotel room is about $300 a night. And property? We’ve heard conflicting reports. It was recently the hottest city in the hottest economy in the world. The government has tried to calm the property market in China – with some success. Sales fell some 70% from the beginning of 2010 to the end of it. Prices dropped 30%.

And now?

“That’s the thing about China,” said a Dear Reader who joined us for a drink on Saturday night. “When you live in the US or in the UK you might think you know what is going on…but when you live here in China, you realize that you have no idea.”

So, let’s turn our attention back to the USA, where we have no idea either…but lots of opinions.

The Dow fell 100 points on Friday. Gold under $1,500. Oil under $100.

We’ve tried to get in the spirit of the ‘economic recovery.’ We just can’t do it.

The recovery story was always phony. So then, what’s the real story?

As near as we can tell, there are several stories running at once.

1) The Great Correction – in many of the advanced economies, but centered in America…

2) The continued rise of the developing economies…not just in Asia, but in Latin America and Africa, too.

3) The increasing scarcity of cheap energy, land, water and raw materials.

4) The decline (suicide might better describe it) of the American Empire.

5) The approaching end of the dollar-based world financial system.

There are probably a few more we forgot to mention. Each one on its own might be fairly easy to decipher and predict. But they work together…and at cross-purposes. It’s hard to figure out what is really going on…or what is causing it.

For example, the correction tends to depress prices. But the big expansion in the developing world tends to increase them.

And there’s one more major pressure on prices – the feds. The US controls the world’s reserve currency. And the US is working hard to inflate the world’s supply of dollars. That too should increase prices, eventually.

The trouble with inflation today is that it is the worst kind of inflation. It makes prices go up…but not incomes, at least not in the US. Incomes are rising in Asia. So, people can buy more cars and more meat – and push up prices. Then, Americans pay higher prices…while their incomes don’t rise.

Why don’t their incomes rise too? Because the US is in a Great Correction. It spent too much and borrowed too much in the boom/bubble years. Now, it’s paying the price. That’s why so few houses are being built; we built today’s houses yesterday. And it’s why so little money is being borrowed and spent today; we already spent it.

The Fed seems to have no idea what is really going on – probably intentionally. So, it tries to combat the correction by issuing more credit and printing more dollars – as if we didn’t have enough already. This extra money further pushes up prices, adding to Americans’ misery.

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