The watery planet seems to be becoming even more watery. It was pouring in the U.K. yesterday, when we left. Gloucester is suffering the worst flooding in 60 years. Tewkesbury has become the Venice of England.

Get used to it, say the meteorologists. More rain is on the way.

Maybe a lot more rain. "Climate change," say some Canadian experts. They say that more water in the Northern Hemisphere is consistent with their climate models. The tropics are getting drier. But temperate areas of the planet are supposed to be getting wetter. We wonder if these are the same experts who said a couple of years ago that England would be more like Italy in the summer - hotter and drier?

The climate experts scored a real coup when they changed "global warming" to "climate change." Now every change in the weather is consistent with their models.

"We've had an unusually wet summer in California too," said an old friend we met here in Vancouver. And in Vancouver itself, it is…well…raining.

Meanwhile, we mentioned that Ben Bernanke spoke to Congress a few days ago. He dumbed down his view of things to a level the politicians could grasp. But we wonder if he went too far.

The key element to the Bernanke view is that inflation is no problem…and becoming less of a problem all the time. If you take out food and fuel, he pointed out, the cost of living is not going up too fast. Of course, it is a strange American who lives without food or fuel, so we take his remarks as a kind of theoretical discussion…of interest only to economists and philosophers.

Speaking of economists…

A party of economists is climbing the Alps. After several hours they became hopelessly lost.

One of them studies the map, turning it up and down, sighting distant landmarks, consulting his compass, and finally the sun.

Finally he turns to the others and says, "See that big mountain over there?"

"Yes," say the others.

"Well, according to my calculations, we're standing on top of it."

According to Ben Bernanke, the mountain we are standing on is one where inflation poses no problem. Our suspicion is that he is wrong. Inflation is very much a problem. Independent analysts tell us that M3 is increasing at 12% per year. M3 is the inconvenient truth that the Labor Department no longer reports. It is the fullest measure of the U.S. money supply…and it is going up three to four times faster than the GDP itself. That is old-fashioned monetary inflation…typically followed by old-fashioned consumer price inflation.

So far, most of the inflation has gone where the money has gone - to the upper end. Monets, corporate jets, Manhattan apartments…and a lot of other things the rich spend their money on…are going up at a breathtaking pace. The aforementioned fuel, too, is 30% higher than it was last year. And food? Yes, that is soaring too…thanks to competition for grains from ethanol producers. Gold, above $680, has risen more than 7% so far this year too.

But our guess is that Bernanke is not completely on the level. He may be worried about inflation; but he may also be worried about problems in the lending industry. The pain of subprime mortgage lending doesn't seem to be as well contained as people thought. No one knows how bad many derivative positions are mispriced. No one knows how many speculators are in over their heads. And no one knows how bad the damage might be if a lot of this CDO debt were to suddenly collapse.

One thing is sure. No one wants to find out…including Ben Bernanke. Unfortunately, we all may be staring down the barrel of this housing crisis sooner, rather than later.

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