. . . . . But even as this bubble recedes, its consequences are hurting those countries and investors who bet on or benefited from higher prices. That includes emerging markets that are largely commodity plays, such as Russia and the Persian Gulf countries. Within the U.S., this includes the farm belt and ethanol alley in the Midwest. The ethanol lobby is already floating the prospect of a taxpayer bailout, as if it wasn't floating on taxpayer subsidies already. Hong Kong conglomerate Citic Pacific and a pair of Chinese companies may have lost hundreds of millions on faulty currency bets. Hedge funds that gambled on commodities or a weaker greenback have had to cover their bets and deleverag...

. . . . . But even as this bubble recedes, its consequences are hurting those countries and investors who bet on or benefited from higher prices. That includes emerging markets that are largely commodity plays, such as Russia and the Persian Gulf countries. Within the U.S., this includes the farm belt and ethanol alley in the Midwest. The ethanol lobby is already floating the prospect of a taxpayer bailout, as if it wasn't floating on taxpayer subsidies already. Hong Kong conglomerate Citic Pacific and a pair of Chinese companies may have lost hundreds of millions on faulty currency bets. Hedge funds that gambled on commodities or a weaker greenback have had to cover their bets and deleverage. You can expect more such country and hedge-fund blowups in the coming weeks.

The tragedy of the second bubble is that it has left the economy in a weaker position to ride out the housing slump and credit panic. The American consumer has been whipsawed with $4 dollar gas and food inflation, while entire industries have been put on the edge of bankruptcy. Detroit's auto makers have spent the last year taking down their truck and SUV assembly lines while gearing up to make hybrids and electric cars, even as their cash flow has been ravaged. Their new investments are based on the expectation that oil will stay high permanently, but will the market for hybrids exist if oil is $50 a barrel?

As Congress plumbs the causes of our current mess, the main one is hiding in plain sight: Reckless monetary policy that did so much to create the credit mania and then compounded the felony with a commodity bubble and run on the dollar whose damage is now becoming apparent. The American people intuitively understand what's been done to them, which is why they are so angry. If the next President ignores the monetary roots of our troubles, he is courting the same fate as George W. Bush.