CLARKONOMICS: The financial activities of the past weekend and the collapse of overseas stock markets highlight that the world has lost faith in U.S. markets, banks and brokerage houses. Bear Stearns -- a company not really familiar to most Americans -- lost 99% of its value, and the Federal Reserve worked all weekend to engineer JP Morgan's bailout purchase of the company using taxpayer money.

So what's going to happen next? No one knows. The Fed's moves have paradoxically been both not enough and too much. Our financial markets got into trouble bit by bit, with idiotic mortgage lending and other practices. Bear Stearns was involved in structuring, which is really like selling garbage with a bow on it. Here's an example: Say that Christa wants to buy a home. She goes to Clark's bank to borrow. Clark lends her the money, but he isn't sure she'll pay back the loan. So Clark turns around and sells off Christa's loan to Joel's brokerage house, which offers to pay 95 cents on the dollar. But Joel doesn't think Christa will pay either, so he bundles her loan with thousands of others like it and markets them to individual investors and big institutional investors. That, in a nutshell, is an explanation of the mortgage securities market. The individual loans became hot potatoes and people suddenly started getting burned.

So here we are as Americans with excessive debt; a government taking on debt like crazy; and the Federal Reserve trying to pump money into the system, which sends the dollar into the toilet and starts a vicious circle. Consider this: People who don't use U.S. currency are not paying high gas prices. So why are we? Simply put, it now takes more U.S. dollars to buy the same barrel of oil thanks to the Fed devaluing our currency. If all this negativity sounds awful, realize that it's all part of capitalism. Relief will come, but it will be a very slow process.