There is theory. And there are the facts. And often, the twain do not meet. At least, not nearly as often as they should.

We note, for example, that Nanjing Automobile, owner of what used to be MG of Birmingham, England, has decided to build a manufacturing plant in Ardmore, Oklahoma. Nanjing joins Toyota, Honda, Nissan, and Hyundai with auto manufacturing plants all over the United States. We have written more than once that high U.S. labor costs make manufacturing a losing business in America. But U.S. labor costs only seem to be a problem for U.S. companies. Apparently, everyone can make money building cars in America - except Americans.

We don't know what to make of it, so we will leave it alone and return to facts that are more convenient.

The U.S. trade gap grew in May to $63.8 billion. But take away oil imports, and the gap actually fell. This is what we expect. Americans are running out of money. They can't afford to continue buying oil and buying more junk, too. Something's got to give, and it will be junk. Consumer spending, at least on the more frivolous items, will fall...we are sure.

More evidence of this comes from Las Vegas, which, according to Reuters, is feeling the pinch of higher fuel prices and squeezed family budgets. Las Vegas is a playground for Middle America. When the lumpen run short of money, Las Vegas shrivels.

We find that Disney, also nourished on the blood of the middle classes, is "slashing jobs."

And now comes news that commodities are rising across the board. Now comes news that that nickel has hit a new high of $26,600 a metric ton, oil is over $74, and gold is trading over $650 an ounce. Corn and wheat are at 10-year highs. This, too, fits nicely into our theory. While Americans run out of dollars, foreigners have plenty of them. They're bidding up prices on the things that are not easily "Made in China."

We see also that the yield on the two-year note is higher than the yield on the 10-year. This inverted yield curve also suggests, foretells, or perhaps even creates a weakening economy. In America, the Bernanke Fed has already cranked hard on the tap. Rumor has it that it will give it another 25-basis-point twist next month.

How does Ben Bernanke know exactly what rate the world needs? If he could know such a thing, why not ask him to set the price of sugar, copper, and iPods, too? No, neither the chairman of the Princeton economics department nor the chairman of the Fed can know what isn't knowable - the exact rate at which lenders would lend and borrowers would borrow if they didn't have the Fed fixing prices.

Of course, that is not really what the Fed chief is trying to do, either. He is not figuring out an unknown, but fighting an unseen. Instead of letting the economy blow whither its lists, Bernanke has a theory of his own about whither it should be listing. He is simply not going to go along with the trend, whatever that might be. He's fighting it, whatever it is. He's determined to deliver a knockout blow to inflation, before it even appears. He'll do this to reassure bond buyers, mortgage lenders and overseas dollar-holders of what he himself is unsure of. And then, as soon as his flanks are covered, he'll march his army down to face deflation.

But if our theory is right, the poor man will succeed all too well in his first battle, and lose his second. America, finally, will follow Japan into a "lost decade." Maybe more than a decade. Maybe a lost generation.

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