It was the "Year of the Junk Bond," says Forbes. Lenders lent to marginal enterprises as if they were the last borrowers on earth.

But wait - so did lenders lend to marginal homebuyers. Junk mortgages - where buyers borrow more money than they can pay back to buy houses they can't really afford at prices that are higher than the houses are worth, promising to pay back the loan only when - and if - they can get around to it - also hit record numbers.

So many records were broken in 2006, we could barely keep up with them. Private equity was on a roll by year end - with twice as many deals as the year before...financed, of course, by record lending on the part of recordly reckless lenders with a record amount of loose change in their pockets.

Mergers and acquisitions, too, hit record levels. Corporate profits reached record levels. Real estate deals in New York City hit noteworthy records. And of course, so did derivatives. And the Dow itself, as everyone knows, was at record levels.

Everything was hot in 2006, not just Wall Street. January through June was the warmest first half of any year in the continental United States since records began in 1895. The average January-June temperature was 51.8 degrees Fahrenheit - 3.4 degrees above the 20th century average.

It was so hot that both Britney and the hedge funds forgot to put on their shorts. The former Mrs. Federline set a record for celebrity buffoonishness...but the hedge funds set a record too. The great guru, Joe Granville, once walked onto stage to give a speech and immediately dropped his pants. "This is just to show you the importance of shorts," he told the audience. But in 2006, hedge funds forgot the lesson. They stopped hedging in order to attract more money. Everyone seems to think he can get rich by speculating...but you can't get rich speculating on the down side while the bubble is still hitting new records. So, the hedge funds dropped their shorts and started speculating on the long side...along with every other addled gambler with a drink in his hand and a dollar in his pocket.

There were records set in politics too. It was the first time ever, so as we can recall, that a Vice President of the United States of America mistook a middle-aged hunter for a duck and blasted him with buckshot. And the Bush administration must have broken all records for spending money...as well as for overseas military misadventures. But who bothers to keep track?

Records are meant to be broken, but we didn't realize that so many of them had to be broken in such a short period. Housing properties all over the world hit record levels. Even in places like Bombay, India, you can pay as much for an apartment as you would in New York. House prices in England rushed up 10%...even though they began the year already at extraordinarily high levels.

All over the world, stocks hit new highs...with the Chinese leading the way. Chinese stocks doubled in the last year, hitting - naturally - a new record. So did commodities. Tin reached a 17-year high by year-end. Corn is at a 10-year high. And uranium is near an all-time record high last month, closing at nearly twice the level at which it began the year.

Many consumer prices, too, reached record highs. Housing, of course. Gas prices rose nearly two cents over the past two weeks, to a record high of $3.02 per gallon of self-serve regular, a national survey reported Sunday. But health care, transportation (largely because of record oil prices), and education rose too!

But the record we find most intriguing is in the art market. Overall, the Mei-Moses art index rose a record 22%. In the summer, a Gustav Klimt sold for a record $135 million. No one had ever paid that much for a painting. And then, a few months later in the year, along came someone with more money to spend. He laid out $140 million for a Jackson Pollack.

And here, we have to sit down and compose ourselves, our pulse races so. The buyer chose to remain anonymous. What a shame. Anyone who would spend $140 million on a dreadful painting deserves notoriety. In fact, more than that...he deserves clinical study. That amount of money would produce about $7 million in income each year, if invested at 5%. What kind of person could get $7 million dollars worth of pleasure from looking at a Jackson Pollack painting each year? What kind of person would be willing to look at it at all? We need to know more. Is this person normal? Is he allowed out in public? Is he human? Obviously, he has a lot more money than we do. But if he is so rich, how come he's not smart? Or are we the dumb ones?

If he cannot get $7 million in annual satisfaction from the painting, perhaps he can rent it out. Yes, dear reader, maybe you will have the opportunity to rent it. Let's see, the daily rate should be something like $20,000. Surely you'd pay $20,000 to have an oeuvre of Jackson Pollack's on your wall for 24 hours. Who wouldn't?

Unless the owner can get a return of $7 million...he must be counting on something other than yield. He must be counting on capital gains! He must be counting on an even higher price...and an even greater record! He's probably betting that there is an even greater fool.

And he may be right.

What is the source of all this record-breaking activity, you might ask? A "Wave of Liquidity," says the Financial Times. Bank Credit Analyst, in Montreal, picked up the idea, predicting that the 'wave of liquidity' would continue in 2007. The Wall Street Journal, meanwhile, modified the idea slightly, referring to investors riding 'rapids' of cash.

Rapids, waves, swells, tsunamis...no matter what you call it, there is a huge amount of liquidity in the world. And at of the close of 2006, it was still pushing up asset prices and setting new records just about everywhere.

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