Well, another week has passed away. What history was made this week? As reported yesterday, the U.S. current account hit a new record. American economists brushed it aside, but it is a warning of more history to come.

Neither a person, nor an economy, nor even an empire can spend more than it makes forever.

But what history are we talking about? An epic on the U.S. economy such as: American Wealth: Gone with the Wind? Or, a sentimental narrative of Ben Bernanke's role: Catcher at the Fed? Ah, there's the trouble with history. You can only read it after it has been written. We don't even know the title. There are no sneak previews, advance releases, no outlines or summaries. When we write a book, everyone knows months in advance what it will say. The publisher has the gist of it in his hands even before we begin writing. And then, when the manuscript is completed, we send it around to friends and colleagues to see how they react to it. If they are not too appalled, we send the thing to press.

Not so history. No mortal eyes see it until after the fact, until after it has happened, until after the damage has been sustained. Until then, we just guess and whisper to one another with nothing more to go on than what history has written before. Is this war in Iraq going to be like Britain's war in Iraq of the 1920s? Or like France's war in Algeria of the 1950s? Will the next bear market on Wall Street be like the bear market of 2000-2001 or the bear market of 1966-1982? Yes, like Jacqueline Suzanne or Tom Clancy, history has her favorite plots, her habitual characters, her familiar twists and turns. But, she has to keep us guessing too or we will stop reading.

How will the current account story play out? We look at history's previous works and we find little to help us. Usually, it is a ThirdWorld banana republic that runs deficits of this magnitude not an empire that has gone bananas. When the deficits reach 5% of GDP, the world's investors typically won't stand for it. They sell off the nation's currency and its bonds and vow never to go near the country again, not even for a holiday.

Meanwhile, in the homeland, things turn nasty. In Argentina, for example, the middle class was practically wiped out in the last chapter of that South American classic, Greenspan of the Pampas. The rich had their money in Miami - in dollars. The poor had nothing to lose, but those who trusted the government, its money, and its promises, were cleaned out.

But what's this? Since 2001, the Argentine Peso has risen 7% against the dollar. How's that for a plot twist? Now, whose money is in danger? The American middle class's money, no? The U.S. is running a current account deficit of 7% of GDP - and rising. If we could tell anything from reading history's other financial farces, we would guess that what awaits the U.S. dollar is inflation and then hyperinflation. The Bank of Ben Bernanke is in favor of it. U.S. consumers - deep in debt - desperately need it. So does the U.S. government, also deep in debt. And all over the world, central bankers are doing their level best to create it.

No one wants a rising currency.

That does not mean they won't get it. For here is the dramatic tension in this story: while everyone wants inflation, other factors are working against it. China, India, the Internet, globalization, and Wal-Mart - all are pushing prices down, not up. And we wonder, too, if history would write a story with such an ambiguous moral lesson. Millions of middle-class debtors have borrowed money, confident that they will never have to pay it back. The Bank of Ben Bernanke will make sure of that, they told themselves when they stuck their hands out. The fed chairman has gone on record saying that he would drop money from helicopters, if necessary, in order to make sure that a 2006 dollar will be worth more than a 2007 dollar, which will be worth more than a 2008 dollar.

Yes, that is another illustration of how history grinds away. The dollar was once stable and solid and the Fed was set up to make sure it stayed that way. Instead, the Fed gradually destroys the dollar and provides speculators with an opportunity. Now, they can anticipate the Fed's game and play their own. They can borrow more than they should, knowing that the money they pay back will be worth less than it should. They can join the Fed in cheating the savers and lenders (who, of course, have their own little hustles going). But, will history really let America's borrowers off the hook? What kind of morality tale would it be if the all these gamers, opportunists, and chiselers got what they expected, rather than what they deserved?

We don't know, but in today's news we read that inflation is under control, which will mean an early end to the Fed's tightening cycle. Investors are getting excited about that, says an analyst quoted in the International Herald Tribune. They might be less excited, and more worried, if they could read the next chapter.

Bill Bonner, back in Paris with more thoughts...

*** Welp, it looks like the government will be able to pay their bills after all. Yesterday the Senate approved a $781 billion increase in U.S. borrowing authority, heeding the "increasingly urgent warnings" made by Treasury Secretary John Snow.

"I am urging members of Congress in the strongest possible terms to resist coupling an increase in the debt ceiling with other issues," Snow said.

"Rather, they should vote to raise the ceiling this week. It would be unthinkable for them not to take action," he said, warning that the "full faith and credit" of the U.S. government was too precious to be compromised.

The Senate voted 52-48 to raise the federal debt limit to $8.965 trillion - and this is the fourth time since 2002 that the cap has been raised.

So, this begs the question - what's the point of having a debt ceiling if we're just going to continue to raise it to keep up with our "reckless fiscal policies," as Senate Minority Leader Harry Reid puts it?

*** While it may be true that investors generally get what they have coming, we can't easily know what that is. History has her own idea of justice, her own accounts to settle, and her own sense of humor. Some of the Nazi's worst criminals lived to old age, raising cattle in Argentina or even receiving pensions in Vienna. But they must have been always looking over their shoulders, always wondering when a relative of one of their victims would send a letter bomb - always worrying that history would catch up.

*** Former Goldman Sachs investment banker John Talbott says in his new book, "Sell Now! The End of the Housing Bubble," that many Americans could be facing a 50% decline in housing prices. He estimates that America's top 40 cities will see an average 47.2% decline: Boston is 49.4%, Miami 44.8%, New York 44.6%, and Chicago 27.3%.

In the space of five years, Alan Greenapan's cheap-money policies have added $30 trillion to housing prices worldwide, an unsustainable 75% increase, he says.

And this from Gary Shilling writing in Forbes:

"The current housing weakness will develop into a full-scale rout.It's clearly a bubble and is nationwide...The house price collapse will induce a painful recession that will send U.S. stocks into a tailspin...China will suffer a hard landing...and weakness in the U.S. and China will spread worldwide."

 *** There are said to be demonstrations going on all over France. Well, we tried going down to one to get our fair share of abuse. But we've seen no sign of any so far.

*** And this from Elisabeth Donati, the woman who runs the Money Camp in Santa Barbara. She is agitated by the reaction of the press to her financial boot camp:

"Contact Reason: Editorial

"Message: Perhaps if you'd asked, you would have gotten even some of this correct. I am so disappointed with your commentary on what we do at The Money Camp for Kids I can't begin to tell you.

"It's not about being capitalists; it's about taking responsibility for your own life and that includes taking responsibility for creating the money it's going to take to fund your own retirement. We don't need any more people dependent on any system and investing in stocks, real estate and building businesses is how the vast majority of people that are financially free do it. I suggest you giving me a call and asking what I'm doing before you print what you printed, which was terrible, untrue and just flat out stupid!"

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