"Fed's Rate Ruling May Fail to Lift U.S. Stocks as Economy Slows" is the information-packed headline from Bloomberg yesterday. 

The financial media thinks it has it all figured out. The Fed will not raise rates today.  And investors, who have already discounted the end of rate increases, will sell shares on the news.

Each era produces its own inimitable theatre - complete with its own heroes, stars and villains. As recently as the 1980s, the world of finance looked to the money supply figures for entertainment. When the new numbers came upon the stage, the audience hissed and booed if they were high, and applauded if they were low. Everyone knew that the money supply was the key to inflation. And everyone knew that controlling inflation was the key to the stock market and the economy. 

Now, it is a new era, and the old M3 is so much yesterday's idol that it has disappeared from the financial news. The feds no longer even announce the numbers...who claps or boos?

Thus has Mister Alan Greenspan transformed the role of the U.S. central banker - previously a bit player on the international financial scene - into a stellar combination...something of the order of Britney Spears' acting talent crossed with Brad Pitt's skill as a heart-surgeon. The amalgamation, of course, is likely to prove fatal to the economy.

Thus has Ben Bernanke, former chieftain of the Princeton economics department, sprung into the saddle. The world turns its eyes to him - as if he were Geronimo and Agent 007 combined...a man on whom its fate depends.

His immediate challenge is the one we have described often enough in these daily reckonings. The consumer finally appears to be exhausted. As Ms. Clinton tells us, he cannot work harder or borrow more; he surely cannot save less. His spending power is being undermined - in the lingo of economics - both structurally and cyclically. 

Structurally, he faces two billion Asians who have jumped into the global labor pool and would be only too delighted to earn, say, one-tenth as much as the average American.  Cyclically, he stares at his own balance sheet, dripping in red. Egged on for years by Alan "Bubbles" Greenspan, hordes of consumers have been hooked into the bad habit of pressing down on the debit side of the ledger for ready cash. Now, the hapless lumps owe more money to more people than any society ever did. With fuel, housing, education and health bills soaring, they rummage through their pockets only to find they have nothing more to spend. 

Even an economist of Mr. Bernanke's rank can put two and two together. The U.S. economy is nearly 70% consumer spending. When consumers can no longer spend in the style to which they've become accustomed, you get a slowdown...a slump...even a genuine recession. It is that simple.

And, the very same price increases that cut into Mr. Average American's spending money, have also cut into the options Mr. Bernanke, as chief banker, now has.

A central banker, after all, is a magician more than a juggler or sword-swallower. His trade is just as gaudy as theirs, but it uses more legerdemain. Shaking easy money into the economy like confetti, he tricks it into thinking it is richer than it really is. Sales go up; investment increases; the economy booms. But, as Milton Friedman predicted, eventually the additional money drives up prices and people come to realize that they've been had. Adjusted for inflation, they're no better off than they were before. Then, they stop investing, cut back on spending, and the economy stagnates - even as prices rise. The banker thrusts his arm into the credit hat for one last rabbit and comes up empty-handed.

A slowing economy with prices on the rise, better known as "stagflation," is what you get after easy credit loses its magic. 

What can a poor central banker do? What he needs is another hand, but a three-handed banker has yet to appear. Meanwhile, Bernanke can use his one hand to raise rates and fight inflation, or to lower them and fight stagnation.

But not both.

*** Oil trades at nearly $77, and gold is up to around $646.

Are investors rediscovering safety in things that come out of holes in the ground, rather than things that come out of printing presses? Maybe, dear reader, maybe.

*** Property in Britain, as in the United States, seems ready to go down. Still, it has not.  According to the Land Registry, prices are 7.7% higher this year than last, led by our old neighborhoods in London, Kensington and Chelsea, with an 8.6% gain and an average selling price of 808,585 pounds (about $1.5 million).

*** Michael Milken says China's economy will overtake the United States in this century. Maybe. Even so, the United States will have enjoyed a good run. It took the number-one place in about 1900, shouldering Great Britain out of the way. Since then, it has been the world's leading economy...and now, its reigning empire.

*** China is a good bet to replace the United States; it is growing very quickly, with wages rising 15% - 20% in a single year. But India is a good bet, too. Colleague Lila Rajiva updates us:

"The India investment story is still hot, but to avoid pitfalls, investors should stay tuned to the nuances. In a recent Forbes piece, for instance, Carl Delfeld, head of the global advisory firm Chartwell Partners, had an explanation of why the Indian tiger might soon be mauling the Chinese dragon. Delfield gives the usual reasons - the Indian tradition of property rights and legal protections, widespread familiarity with English among educated people, a stock market that goes back to 1870, a young population (50% under the age of 25), and growth that is more balanced and less dependent on foreign investment.

"Delfield is right on all counts, but there's one crucial thing he doesn't mention. And that is that the Indian population has a high level of technical skill in a number of fields. Computer technology has got the most press so far, but investors should know that India also has an enormous pool of well-trained finance professionals, lawyers, and doctors that it hasn't yet fully tapped. In contrast, low-wage labor, which is more important to manufacturing, seems to do better in China. That could be partly because India's low-wage workers have to contend with rigid local labor laws. Or, it could be because of weak primary education and facilities.

"But whatever the cause, the divergence between high-wage professionals and low-wage workers is something to mull over when picking Indian investments. Industries and sectors that depend on skilled professionals are simply a better bet. This means computers and information technology, of course, but it also means financial services, pharmaceuticals, and consulting.

"This angle of the Indian-growth story leaps out at you when you look at something like the Forbes list of the 40 richest Indians. It included 27 billionaires this year, more than double last year's number. The "fat 40" had a total net worth of $106 billion. That's up from $61 billion last year, and more than two and a half times what China's fattest cats are worth ($26 billion).

"Now, check this out. Of the Indian 40, an astonishing one-third makes his money, all or mostly, from information technology, telecommunications, and the media. Their companies include such familiar names as software exporter Wipro, and media giant Zee TV, of course. But, you also see less well-known players, like the Internet casino company, PartyGaming. And, notice that almost one-quarter of these richest 40 Indians are involved in medicine in some way - from Ranbaxy, the pharmaceutical giant, to hospital chain, Fortis.
 
"That's the big clue for investors looking for sectors and stocks likely to outperform. Stick with India's professional knowledge base. Delfeld, for instance, recommends Dr Reddy's Laboratories (NYSE: RDY) and HDFC Bank
(NYSE: HDB). But there are also lesser-known IT stocks, like Satyam Computer Services (NYSE: SAY). And, in medicine, you could look at a generics producer, such as Cipla - or Dabur, which makes herbal products.

"In India, pick the professionals..."

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