When money-printing goes to excess, as it almost always does, speculation occurs. (Which isn't to say that speculation requires money-printing. It doesn't.) However, one can never know in advance exactly where the speculative juices will flow and what assets or markets will be kited wildly higher.

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Look at what happened when Greenspan printed too much money (which was kid stuff compared to what we see today). In the mid to late 1990s, stocks went on a tear, culminating in the sheer lunacy of the year-long-plus dot-com craze. Lust (greed) sent the market caps of websites into the multi-billion-dollar stratosphere, based on nothing more than targeting "eyeballs."

Subsequently, money-printing that was used to mitigate the ill effects of that bubble caused real-estate prices to become insane -- or more precisely, the financing terms of real estate. During that period, stocks also went wild, with some of the zaniest action occurring in the leveraged buyout arena.

"Modern-day" wisdom (i.e. that of the last 20 years or so) has it that this money-printing will just fix things and not lead to excesses or inflation. But that's a silly notion. It's not as though quantitative easing is a precision instrument that targets only bank balance sheets. The money flows where it will and can go anywhere (as I noted yesterday).

What excessive money-printing always leads to, in addition to speculation, is inflation, a weaker currency, and higher interest rates. The latter 2 -- components of the nascent funding crisis -- are what we've seen recently. (On that score, more saber-rattling occurred last night when Alexei Ulyukayev, first deputy chairman of Russia's central bank, said it might convert some Treasury reserves into International Monetary Fund debt.)

Nonetheless, folks are of the persuasion that there can be no inflation of any consequence because wages aren't galloping higher (as they were in the 1970s, led by strong union activity). That argument simply isn't true. For the last 10 to 15 years, when inflation has supposedly been tame (due, in part, to the fact that it's been substituted and Hedonicized away), there were plenty of large price increases over that time span, as anyone who shops knows.

Throughout those 2 bubbles, even though there was no generalized wage pressure because the majority of the money flowed elsewhere, wages were still driven higher as the unemployment rate bottomed out at the top of the bubble. In other words, even without a rampant upward spiral in wages, we still experienced real inflation.

The other presumed barrier is the so-called output gap -- which holds that slack capacity will keep inflation at bay. While that theory sounds appealing, it's also not been effective at warding off inflation.

So, for the time being, worldwide money printing has spawned a healing process in the financial system. The world economy has bounced from an overly depressed state, causing financial markets to lift -- all of which has engendered a feeling that the worst is behind us. (Home Depot (HD) was on the tape today saying just that.)

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Many industries may have seen their worst, but that doesn't mean the sum total of businesses -- i.e., the economy -- will be strong anytime soon. When I say "strong," I mean capable of generating lots of good jobs, which at the end of the day is what's required.

Money-printing has bought us another round of speculation, and while we don't know what other unintended consequences will follow, it looks increasingly likely that this latest round has also "bought" a funding crisis. What it almost surely hasn't created is a self-sustaining recovery.