Yesterday, US mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) fell to their lowest levels in nearly 20 years on fears that the government will be forced to bail them out.

The precipitous drop of Fannie and Freddie stock freaked out Wall Street. Traders sent the Dow Jones industrials down more than 175 points.

The culprit, says The Huffington Post, is a Barron’s article. The magazine said the Treasury might have to bail out Fannie and Freddie. This would likely wipe out shareholders’ equity in the companies. Bill Bonner expected nothing less…

The two lenders are said to be worth about a negative $50 billion each – for a grand total of $100 billion. Of course, the feds don’t exactly have a spare $100 billion lying around. But so what…they’ve got plenty of funny money. As the endgame comes for more American businesses and households, you can expect to see a lot more funny money passing itself off as the real stuff.

The more funny money in the system, the more inflation we can expect. Inflation may not be dead at all, says Bill, but just taking a rest.

Oil may be going down, but it’s not likely to go back to where it was in 2002. And since oil is so essential to the modern economy, higher priced oil is likely to continue working its way into consumer prices all over the world. And maybe China, India and Russia don’t fall into such a deep slump that they stop using so much oil and other raw materials. And maybe their labor costs continue to rise at 10% per year – which then pumps up their export prices at double digit rates.

And, perhaps most important, neither the people nor the theories in modern central banking have changed. They are committed to a system with the dollar as its foundation…a system that ALMOST guarantees inflation.

We don’t know what will happen – every day is a new day, after all – but we know how these central bankers think. And the more a recessionary downturn grips the world, the more Bernanke & Co. will fight against it. And they fight dirty – with counterfeit money.

P.S. Bill says buy gold on dips; sell stocks on rallies. We don’t have much of a rally in the stock market, but we have a nice dip in gold. Take advantage of it…and buy gold with your pocket change. See how here.