Our old friend Dr. Kurt Richebächer died last week, in Cannes, France. He was 88 years old, and his writings were a staple among many people’s required reading list. As Chuck Butler puts it in today’s issue of The Daily Pfennig, “Yes, I used to kid about how when you read one of his letters you need to put away all the sharp objects... But he told it like no one else...

“He didn’t pull punches, and he was always ahead of all other economists with his thoughts. I will miss his writings... And the world has lost an economist that didn't cower to Washington...”

Dr. Richebächer, R.I.P. (More on the Good Doctor to come...)

Everything is always the same. And everything is always changing. People come and go. So do bubbles.

Humans apparently came to be what they are by millions of years of evolutionary selection. We were shaped by circumstances just as giraffes or warthogs were created by their environments...and chance.

Here at The Daily Reckoning we observe humans the way botanists look at flowers. We watch them bloom and whither...and trace the seasons of their lives. Sometimes they are bullish and colorful. Other times, they fear the chilly winds and close up upon themselves.

Circumstances change all the time. But humans evolve too slowly to keep up. Today’s people are the same, more or less, as those who stormed the Bastille...built the Pyramids...and crossed the Bering Straits wearing skins. They always hope to get something for nothing...and are deeply disappointed when they don’t. Thus do they create their own cyclical patterns of temptation, error and regret...repeated over and over again...from the dawn of creation to the crack of doom.

What is new and different is that never before have we seen economic and financial patterns played out on such magnificent scale. Never before has so much money chased so many goods and services. Never before have central banks had so much power to distort markets. Never before has any nation been able to get away with such grand larceny as the United States. Never before have any people been permitted to go so deeply into debt as Americans. Never before have capitalists been able to buy so much rope with which to hang themselves – on credit, no less. And never before have so many institutions come to the rescue, and never more quickly, than when the capitalists recently slung the rope over the rafters and got ready to step up on a chair.

We were just settling down to watch the body jerk and shake...and listen to the gurgling sounds...when the central bankers cut the cord...slicing the discount rate so as to given unworthy banks even more credit. Then, along came George W. Bush with encouraging words for the nation’s debt-laden homeowners. They may have bought houses they couldn’t really afford, with money they didn’t really have, but now...they can count on the president to help them hold onto them.

In other words, we suspect that the basic program for this cycle will be the same as it always is. When money is too easy to get, people tend to use it unwisely. Mistakes are made. Gradually, the mistakes build up until a correction becomes inevitable. Naturally, people who hoped to get something for nothing...and seemed actually to get something for nothing when the going was good...expect ‘relief’ and ‘rescue’ when the something seems to be getting away from them.

And then when the rescue squad shows up, they tend to breathe a sigh of relief...there is a doctor on the case!

The U.S. stock market hit a high on July 19th. It may have been THE HIGH for the entire worldwide credit bubble; we don’t know. What we know is that scarcely had prices fallen – less than 10% from all-time highs – when every financial official deemed it essential that he act swiftly and resolutely to forestall even greater losses. A month later, the Dow hit a low and has been recovering since. Yesterday, the index rose 91 points.

“ALL IS WELL,” everyone said in unison.

But all is not well at all. The basic problem is that the financial world is not really suffering from a syndrome that modern financial medicine can cure. If the ailment were merely a temporary lack of liquidity, central bankers could clear it up tomorrow. But the problem is not illiquidity, it’s insolvency – caused by too much credit, not too little. People, businesses, nations – debtors owe more than they can repay. Borrowing more may postpone the crisis...maybe even disguise it; it cannot solve it.

Gold is coming back. It advanced more than $9 yesterday...to $691 an ounce.

One of the best long-term bets you can make is to bet against the dollar...and holding gold is the safest (and most profitable) way to do it. Get your wealth insurance here.

The dollar is perhaps the greatest source of ‘easy money’ the world has ever seen. The U.S. Treasury can create almost as much of this ‘money’ as it wants – at negligible cost. Ben Bernanke said so!

The feds no longer give out the news, but private analysts continue to track M3 – the broadest measure of U.S. money supply. According to the latest figures, M3 is increasing at about 13% per year – or about four times as fast as GDP.

Nothing destroys an economy more thoroughly than easy money. It multiplies the mistakes people make and magnifies the damage. Yesterday’s paper tells us that Venezuela is beginning to suffer the effects of easy money. In Venezuela’s case, the money came from the oil boom. Venezuela is an oil exporter. As the money came in, it permitted President Hugo Chavez (who claims to be an admirer of Trotsky and Guevara) to indulge his fantasies. Now, consumer prices are rising at 16% per year, with certain staples becoming hard to find at any price. The bolivar is falling at nearly 30% per year...and on the black market a U.S. dollar fetches 4,750 bolivars.

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