“Americans have settled into mediocrity,” said Obama last week, perhaps unwittingly putting his finger on the right nerve. Glaring glitches and dichotomies ruled economics as oil and dollar firmed up simultaneously and Citi paid twice treasuries for its borrowings. While the common man is looking for ways of addressing the perceptibly perpetual perishability of money, Uncle Sam says if you don’t fund lifestyles at the St, I will, out of your money. Nobody knows how much US has spent on rescuing banks but for Europe, somebody has put the figure at $5.3 tn. Zero interest notwithstanding, savings rate in US rose to 5.7 percent of disposable income in April.

US Fed is buying paper assets from financial markets because it has to keep the system live and the world is buying paper issued by US Fed because it has to park its savings somewhere. So when China, Brazil and Russia plan to shift some of their money to IMF’s multi-currency bonds, Japan reaffirms its faith in Uncle Sam’s credit worthiness, successfully pushing yield on treasuries down.

Equities and currencies remained generally steady last week, bolstering confidence of bankrupt banks, even as consumption and demand data presented a grim picture. It is clear from BP’s energy report that until the end of 2008 there was no real crisis, except for the one caused by ponzi-like derivatives deals; world energy consumption rose 1.4% to 11.294 bn tons oil equivalent in 2008.

However, in 2009, heavens have indeed started falling. World crude steel output dipped 22.7% to 354 mmt in Q1, production of passenger cars and light trucks is expected to plunge from 68 to 60 mn units in 2009 and IATA expects number of air passengers to dip 8% this year. Global same-store retail sales were down 4.6% and Euro region industrial production dived 21.6% in May, Switzerland has officially gone into recession and inflation in Germany has fallen to zero. US imports of textiles dipped 10% (quantity) in Jan-Apr and World GDP is expected to contract for the first time since WWII.

That mediocrity is indeed ruling the world was confirmed by the CIA, which said 1000th time it believes Osama is in Pakistan and it hopes to find him soon. Finding alternate homes for Guantanamo detainees remains a problem and analysts expect India to emerge as a major buyer of arms in the near future. The UN warned of a third food crisis as 85% of world arable land is already under cultivation while a billion are starving. The far sighted like Japan and China are buying agri-land in Africa and South America while India’s largely elitist govt continues to push for corporate ownership of all land. There are silver linings, such as women coming to fore in Iran elections but the basic rule still applies: “When the economy goes south, crime goes up.” One report says $ 2 bn are being spent every year by human smugglers in the state of Arizona alone.

While Brazil and France are trying to find the debris of the crashed plane, whispers of speed sensors in A330s and A340s being defective are beginning to be heard. France, which actually pioneered the concept of a five day week a few decades ago, is considering lifting of the ban on Sunday working for reasons that aren’t very clear.

Energy consumption of the 29 OECD countries has now fallen below rest of the world, North Korea said Monday it had found two US journalists guilty of entering the state illegally and sentenced both to 12 years of hard labor. Iceland has eventually agreed to pay £2 bn that the British govt paid to depositors of Iceland-owned banks last year and the Indian PM talked of 9% growth even as its exports were plunging more rapidly than world imports. Zimbabwe, which has actually printed billion (Zimbabwe) dollar currency notes, is wooing the US for about $10 bn in loans.

China continues to create more news than most nations. Its banks are opening branches in the third world, it plans to push share in shipbuilding from 30 to 35% in two years, export rebates have been hiked again for most labor-intensive products, and trade surplus with US is still running at well over $10 bn a month. Not surprisingly, private investments abroad have been allowed to a limited extent. Of course everything isn’t rosy. Inflation has touched negative territory and exports and imports are plunging at an alarming speed, though domestic sales of cars have stayed above a million a month for several months now.

Ban on CDSs, CDOs and short selling is being demanded by many. George Soros virtually endorsed state control of banks last week when he attributed success of the Chinese economy to “heavy state role in banking.” Not many seem to be listening.

Bank of America said it was coerced into buying Merrill Lynch, Bain is to buy 18% of Chinese electronics retailer Gome for $440 million, Fiat has completed Chrysler takeover, a Chinese firm is interested in Volvo car units owned by Ford and BlackRock, after buying Barclays Global Investors for $13 bn, boasts of assets under management in excess of $2.5 tn.

Drug majors are rushing to produce billions of doses of flu vaccines and reputed doctors are being paid by pharma companies to append their names to articles endorsing concoctions of inadequately tested new drugs. Tiffany is aghast at customers haggling on price of such routine items like $6 mn engagement rings.

Your life’s savings might have been appropriated by the City or the St but remember that but for them, there would be no beauty pageants and no soccer super leagues. News would become more drab than fiction and perhaps investments in critical areas such as pharma, genomics and renewable energy would come to a standstill. How does it matter if somebody who ensures the right allocation of tens of trillions a year takes a trillion or two home every ten years?

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