– There really must be a financial crisis. John “the fundamentals of our economy are strong” McCain has suspended his presidential campaign to to return to Washington to work on the proposed $700 billion bailout bill of financial institutions before Congress.

– Meanwhile, McCain’s fellow Republican George W. Bush made a televised appeal for the swift passage the plan. He said the “entire economy is in danger” and warned of a “financial panic” and “a long and painful recession” if Congress didn’t pass the bill soon.

– “Most illiquid assets are illiquid because they’re not worth anything,” said Ron Paul to Fed head Ben Bernanke during testimony in Washington, DC, yesterday. Presumably, this holds true even if the “entire economy is in danger.”

– US stock futures are limp this morning following Bush’s address and news that General Electric (NYSE:GE) cut its earnings estimates and halted its stock buyback. “S&P 500 futures rose 3 points to 1,196.00 and Nasdaq 100 futures added 12.25 points to 1,684.25. Dow industrial futures rose 9 points,” according to Market Watch.

– Bush’s dire warnings on the state of the economy he has been in charge of for the last eight years didn’t exactly help the dollar either. The buck “fell to $1.4686 per euro as of 6:35 a.m. in New York, from $1.4621 yesterday,” according to Bloomberg. “The currency declined to 105.91 yen from 106.11. The euro was at 155.57 yen from 155.15. The U.S. currency dropped to $1.8553 against the pound from $1.8465, and to 1.0836 versus the franc from 1.0916.”

– Yesterday on Contrarian Profits, Rude Awakening editor Eric Fry urged investors to “Sell the dollar, sell the dollar, sell the dollar.” (We think he was being pretty clear on this one.)

The Treasury and the Federal hope that these actions will restore buoyancy to the potential markets.  But we doubt it.  Instead, we suspect that these actions will only add buoyancy to the US inflation rate and, therefore, to commodity prices.

Most of the bad guys who created this mess are gone…although not yet in prison where they belong. And most of the American regulatory agencies are eager to change the rules of the game. These two developments are very helpful. But the process of repairing and reforming the American financial system could be painful. The U.S. Treasury will absolutely, positively increase the money supply to rescue the financial system…Which means investors must try to protect themselves against an almost certain inflation.

So what’s an investor to do?

Sell American stocks, bonds and currencies; buy foreign stocks, bonds and currencies. And, of course, buy commodities.

– Crude oil is down near its three-day low in New York on a report that revealed demand is at its lowest in almost five years. According to Bloomberg, “crude oil for November delivery was at $105.77 a barrel, up 4 cents, in after-hours electronic trading on the New York Mercantile Exchange at 12:45 p.m. Singapore time.”

– Eric Roseman in The Sovereign Society is buying oil stocks, nevertheless. He believes “hard assets” like oil and gold are the best assets to own if you believe that inflation remains embedded in the financial system…

Inflation is not dead and commodities remain in a secular bull market as China and other rapidly growing economies continue to boost domestic consumption and increase trade.

The credit crisis is a Western problem, not an Asian one. Balance sheets across Asia are not restricted by sub-prime losses or other mortgage-related write-downs. So the sooner the U.S. finally tackles the credit crisis, the sooner Asian growth will reaccelerate. That’s when I expect commodities to bottom.

The long-term picture remains bullish for these markets and commodities. Over the next 12 months, I see the greatest reflation trade of the century hitting the markets, courtesy of the United States government and the European Union.