What are we to think about the market falling out of bed after Gentle Ben Bernanke's hint last week that he might start tapering off the money printing operation at the Fed? Was it because the Fed is, in fact, following a dangerous deflationary policy, as Larry Kudlow writes? Given that gold and other metals are down 30 percent from their highs, Larry has a point.

Or was it nothing to do with the Fed, but instead renewed problems with the Euro? Or with the property implosion in China?

Probably the answer is: None of the above. The truth is probably the old one about Hollywood and how to produce a hit movie: Nobody knows nothing.

The truth is that governments are always like pitchers trying to pitch out of a jam with all the bases loaded. We the people want a little free stuff. The ruling class wants to seize and hold political power. Promising free stuff is how you get elected.

Usually, those vote-buying promises result in policies that damage the economy. President Obama has been worse than most. The result is that politicians and their officials are always involved in trying to band-aid over the distortions and the wounds they have inflicted on the economy in their crude bid for power.

That is the way to understand the global economic situation. It is governments trying to paper over their mistakes. In the U.S. the government is trying to paper over a credit system that is still badly holed from the mortgage meltdown.

There's only one way that the ruling class knows how to deal with the inevitable consequence of gunning the housing market with mortgage subsidies. Print lots of money to float the underwater mortgages. The Fed wants to stop the presses, and it can, it will some day. But it doesn't want to bring on another panic. The trouble is that even talk about ending its quantitative easing leads to a market swoon.

In Europe the ruling class is trying to deal with the consequence of its 50-year hubris. The people, they decided after World War II, were a bunch of crypto-Nazis. So the enlightened ruling class would federalize Europe to make sure that aggressive nationalism would never rear its ugly head again. That really worked well, so now that the national political leaders in southern Europe are getting themselves riled up into a nationalistic fervor accusing the Germans of being Nazis.

Think of the Chinese ruling class. The Chi-com rulers really want to bring China into the modern era, but they naturally feel that this is only possible under their wise leadership. So they get exactly the crony capitalism we enjoy here in the United States, as the ruling class dribbles subsidies out to its supporters out in the provinces to keep them on-side while they fundamentally transform China.

Now we have the Brazilians pouring into the streets. A couple of years ago the government started printing money to keep the cronies in the Brazilian export sector "competitive."

What can we understand from all this news? It stands to reason. These ruling classes don't have a clue what they are doing. That's what we've been seeing here not just with the Fed but in the IRS and NSA scandals. As Angelo Codevilla writes, those NSA data mining efforts might really amount to something if the NSA had a clue what it was doing.

[T]he aftermath of 9/11, technology, inertia, and allergy to accountability gave the US government the capacity to capture and examine at will well nigh the whole electronic realm. It would very much like to do the protective job that President Obama and Karl Rove claim and may even believe it is doing. But there is no evidence that anyone has figured out how to sidestep the realities that prevent that.

In Codevilla's view, the U.S. government is still going what it decided to do in WWII. Collect everything and then decide what to do with it.

The only thing the government knows to do is to keep doing it the same, only more so. Think Social Security, born 1935; Department of Defense, born 1947. Think Medicare, born 1965. Think Amnesty, born 1987. Think Education, born 1840.

But back to the burning question. Is the market pullback last week the beginning of the end or just a midsummer night's dream? I'd say that the answer has to do with the basic question, is the Fed fighting recession or fighting inflation? My guess is that we are still years away from the Fed deciding that the economy is roaring away out of control and now it's time to put on the brakes.

Christopher Chantrill (mailto:chrischantrill@gmail.com) is a frequent contributor to American Thinker. See his usgovernmentspending.com and also usgovernmentdebt.us. At americanmanifesto.org he is blogging and writing An American Manifesto: Life After Liberalism. Get his Road to the Middle Class.