Who would you rather be, dear reader? Alan Greenspan or Ben Bernanke? Would you rather be coming into the top job at the world's top bank near the beginning of a boom...or near the end of it? Would you rather start when rates are relatively high...or when they are absolutely very low?

The LA Times reports, "30 year Mortgage Rates Fall for a Second Week." But what's this? "Money fund rates near five year highs," says the AP.

Yes, the Financial Times of London informs us, it's true that ye olde yielde curve is pointing in the wrong way - down, rather than up. But don't worry about it, dear reader. Our new Fed chief, Ben Bernanke, tells us that the most reliable predictor of recession - an inverted yield curve
- is old hat. It just doesn't matter in this exciting new economy of ours. We don't need no stinkin' concave bend in the nation's lending rates.

But what if lenders on the long end of the curve - those lending for 10 years or more, such as mortgage lenders - suddenly decide that they need a little more yield to make up for, say, the risk of inflation? Or the risk that the dollar will go down? The supply of dollars is exploding worldwide, faster than just about everything - except maybe automobiles in Paris. But so are the claims against those dollars. As we mentioned a couple of days ago, the Feds' real debts and obligations are over $51 trillion. The interest charges alone are $3 billion a day.

You'd think that long-term lenders would be a little concerned that maybe
- just maybe - the U.S. dollar will not be worth as much in 2036 as it is in 2006.

MSN Money's Jim Jubak notices a couple of reasons why U.S. rates are bound to rise:

"Overseas investors are going to need their own money back to pay for their own old age. Japan is the biggest holder of U.S. Treasuries, and, demographically, it is the oldest country in the developed world. Europe isn't far behind. The U.S. is aging, too, but at a comparatively slower rate. The real demographic story, however, is taking place in China and India. By 2020, the median age of China's huge population will be higher than that of the United States. India is further behind, but by 2050, the median age of its population will be 37.9 years, making the country as old as the United States is today. China and India are both going to get old before they get rich. Because of global demographics, we're looking at a world in transition from a period of surplus capital to a world of tight capital as aging populations go from savers to consumers of savings. Tighter capital means higher interest rates.

"Overseas investors may lose faith in our intention to pay our debts. Sovereign nations saddled with too much debt have an option that's not available to the overstretched homeowner. Instead of declaring bankruptcy, they can just roll the printing presses and create money in order to inflate their way out of the debts. But overseas investors aren't likely to sit still as the value of the dollars they hold and the dollars they receive in interest are slashed as the presses roll. As countries such as Argentina have learned, once investors have decided that the government has lost all discipline, they will demand punitive interest rates. Short-term interest rates broke 100% in Argentina in 2002, for example. Once a country has forfeited the faith of the markets, it takes a long time to earn it back. In Brazil, now lauded for its fiscal responsibility, the equivalent of the U.S. federal funds rate was above 16% in December."

Just why real rates will rise, we don't know. We only know that every day that passes brings us closer to the day real rates must rise again. How do we know that?

Because history never stops grinding. And she grinds out a long trail of ups and downs, bulls and bears, war and peace, life and death. It is a long tale of victory and woe - of battles and bromides, upheavals and downturns, misery and mystery...mistakes, mischance, misfortune. It is also a record of world improvers and their blunders, but we will leave that theme for another day.

That is the history we are seeing in the Middle East, and in the U.S. economy. The former Fed chief tried to improve the world by making credit too cheap. It worked like gangbusters for a long time, but now his successor comes into a different world - a world where borrowers are already loaded up with so much debt they cannot take on much more. And they cannot tolerate a rising cost of credit because they now depend on cheap loans just to keep going.

And yet, history decrees that the cost of credit must go up as well as down. Sometimes people look ahead and see nothing to worry about - and no reason to ask for more than 4% on their money. Other times, they get nervous; they want 10%, 20% or more. Sometimes they'd just as soon do something else with it.

We know what will happen when real rates rise: people will wish they had depended less on credit "just in time" and more on savings "just in case." And that is when Ben Bernanke will wish he were Alan Greenspan.

*** Jim Jubak gives advice to savings-short Americans:

"Since you can't trust their accounting, do your own and be brutally honest. You've probably got some plan for retirement, but do you have a plan to pay for health care after you retire? Fidelity Investments does an annual calculation of how much a couple without employer-sponsored health care should set aside to pay for health-care costs after 65. This year, the recommended health-care nest egg hit $200,000, up 5.3% from last year and up from $160,000 in 2002, when Fidelity started its surveys.

"Save, save and save some more. It won't do the trick alone, but, without capital, you're at a huge disadvantage in a capitalist society.
Right now, you should be saving for retirement, and for health care in retirement, and for the kids' college education - and for a rainy day, too.
There's no way you can do all of that without some pain, so grit your teeth and think of saving like exercise. You may not enjoy it, but your future will be a whole lot brighter if you do it every day.

"Invest what you've saved as intelligently as you can. Every dollar you receive from your investments is a dollar that you don't have to save or earn at your job. I'd divide my portfolio in half. Use half as a core that - either through individual stocks or mutual funds (or ETFs) - puts you on the side of identifiable long-term trends.

"Pay up for education. Whether it's for yourself or your kids, it's the single factor likely to make the most difference in the years ahead. Wage growth stagnated last year, with real wages - that's wages after inflation - actually falling from the fourth quarter of 2004 to the fourth quarter of 2005 by 0.8%. If that's the beginning - or, some would argue, the continuation - of a trend, then the only way to fight back is by constantly upgrading your skills. And our children are now competing in a global economy where the best jobs are increasingly likely to go to the best educated - no matter where they live - and where the only way to justify higher pay is by higher competence or productivity.

"Throw the bums out. I'm not here to preach to you about how to define a bum, but it's clear that we aren't getting the foresight and leadership we need out of our political leaders of either party. So why put up with them? Do more than vote - that's a minimum. Give money, organize, stand on the table and yell, whatever. Force them to pay attention. Otherwise, we'll deserve the politicians we get."

*** On Jubak's last two points we cheerfully dissent. First, throwing the bums out seems hopelessly naïve, and an unsatisfying kindness. A firing squad would be too humane, but what would happen? Bums are lined up all down the Potomac to take their places. No matter how dimwitted the program, the opposition has a program even more block-headed, and a candidate who could make George W. Bush look like John Adams in comparison.

Second, we return to our "good news" theme of yesterday. Most of the money spent by most people is spent for reasons of vanity not necessity. Education included.

We made the point over dinner last night.

"But wait," said Henry, "the more you know, the better off you are. That's why people with more education earn more money."

"That's what all the studies show," added his mother. "Henry, don't pay any attention to your father. He's just making one of his contrarian points. You're going to college."

"Post hoc ergo propter hoc," we replied, delighted to have an opportunity to pull out one of the few Latin maxims we know.

"Dad...you don't even know Latin. I know Latin...I've been studying it in school for the last three years."

"Well, then you can tell us what that means..."

"It means...something like 'after the fact...therefore causing the fact'...something like that."

"Yes, it's a typical logical error that people make. Just because the people who go to college earn more money, it doesn't mean they would have earned any less if they had not gone to college. What if I drank a glass of water and then got sick. It doesn't mean the glass of water made me sick.

"People who go to college tend to be from the middle classes and upper middle classes. People from these classes tend to get white-collar jobs, so they tend to earn more than people who get working-class jobs. As far as I know, no one has ever studied what happened to people with the same backgrounds, I.Q., family connections, ambitions, and so forth, who did not go to college. I'm just talking about liberal arts here...not about science or engineering. If you want to be a doctor, of course you have to go to school.

"But a couple of the smartest and most successful guys I ever met didn't go to college. Actually, one of them did go and dropped out almost immediately. Of course, they're both dead. Does that mean that if you don't go to college you'll die sooner? I bet the statistics show that too
- but it's nonsense.

"One of my friends started his own business and made a fortune. The other one didn't make a lot of money, but he didn't seem to want to. Both of them were very well read. In fact, one of them told me why he had dropped out. He said he stopped because it was interfering with his education. Those are the words he used. He wanted to read books that were important to him and instead he had to go to class and listen to lectures and so forth. Maybe he also felt he would feel compelled to participate in university life - keg parties, football games, campus rallies."

"But all of that is important in helping to develop a young person, helping them make useful contacts, and helping them learn how to get along in the world, don't you think?" asked Elizabeth.

We did not really have the last word in last night's conversation; we rarely do. But at least we will have it in today's Daily Reckoning:

"No...just the opposite. University life is a false life - massively subsidized by parents, dead alumni, and taxpayers. Real life is off campus, and students know it. That's why they're terrified of it. That's why some never want to leave campus. When you're in school, they tell you when the tests are coming. In real life, you never know when you'll be tested...or how."

Take heart, dear reader; we repeat ourselves: there's good news. You can save a fortune on the big-ticket items. Next week: transportation...health care...and more!

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