The most recent economic data that had everyone talking on Wall Street was the Consumer Price Index (CPI). The Labor Department reported last week that the CPI rose 0.4 percent in July, or twice the increase from June. Most of this rise was attributable to fuel prices.

Other items of note were reported last week:

* The Federal Reserve reported that industrial production rose by 0.4 percent in July, half the June increase, as manufacturing output slowed dramatically in reflection of the reversals suffered in U.S. auto manufacturing.

* The Commerce Department said new home construction dropped by 2.5 percent in July, the fifth decline in the past six months. Construction fell to a seasonally adjusted annual rate of 1.782 million units, the slowest pace since November 2004.

* Building permits (a leading indicator) dropped in July by 6.5 percent compared to June, and by 21 percent compared to July 2005, according to the U.S. Housing Dept. Housing starts were 2.5 percent lower in July and 13% below last July. This shows the negative effects the 8-year cycle is having on the housing bubble as predicted.

* American workers fell further behind to rising prices as average weekly wages, adjusted for inflation, fell 0.1 percent, the fourth decline in the past seven months.

"The latest batch of economic indicators suggests that the global synchronized manufacturing boom is actually gaining strength, especially in Europe - and not just in Germany," writes Dr. Ed Yardeni. "During June, Purchasing Managers' Composite Indexes rose to 59.5, 57.5, and 55.1 in Germany, Italy, and the U.K., respectively, with the French index unchanged at a 5-year high of 56.1. U.S. and German factory orders are up 8.0 percent and 11.2 percent, respectively, year-over-year."

As Yardeni explains, the fastest growing orders are for capital goods, which are up 14.6 percent and 14.5 percent year-over-year, respectively in the U.S. and Germany. Most of this demand is coming from nouveau riche countries in Asia, with oil-rich Middle Eastern countries using their petro-profits to expand their economic infrastructures. He also points out that China is committed to building a new industrial zone on their northern coast that will be bigger than either Shanghai's or Shenzhen's; China is also behind the development of natural resources in Africa (the "final frontier" we talked about in a previous article).

Yardeni asks, "When will this boom end?" His answer: When construction of the world's tallest building is completed in Dubai in November 2008, a few months after the Chinese Olympics. This 2008 target date is also mentioned by a few other well known and respected economic strategists. It happens to coincide with the peak of the 12-year cycle, the last cycle above 10 years duration within the 120-year Kress Cycle series scheduled to peak before the final "hard down" phase of the cycle begins in 2009-2010. These economists are suggesting the global economy will peak out slightly ahead of the stock/commodity bull markets and they could be right.

One thing economists rarely make reference to in the ongoing discussion of the global economic boom is the effect that mass psychology has on the economy. Although consumer sentiment indexes do exist they are interpreted with a rather straight-forward conventional approach instead of from the contrarian psychological standpoint. Bombings, and equally significant - the fear of bombs - has been the X-factor of the global economy and U.S. stock market this year. This will be the focus of the second half of our commentary.

By my count there have been at least 700 terrorist bombings (not counting military bombings) since the beginning of this year through August 18 on a global scale and mostly in the Middle East. This number doesn't include the number of bombing attempts that failed or bombs that were diffused, nor does it contain the growing number of bomb threats (which can have the same psychological impact as an actual bombing). The total death toll this year from all non-military bombings is just over 3,200. Most of the deaths occurred in the Mid-East region. The number wounded from terrorist bombings so far this year is well over 10,000. If we combine the number of deaths from all forms of (mostly) Mid-East violence this year, military and terrorist, the number killed is in the tens of thousands. (In a future commentary we'll discuss the population reduction motive behind bombing campaigns but for now our focus is on the psychological/economic effects of bombings).

That strategically timed bombing campaigns, both terrorist and military, can provided an added support beneath the major stock markets as well as bolster the global economy, was a profitable discovery made by the global financial controllers. This is because both the market and the economy are buoyed and to a large extent driven by the base human emotion of fear. The more fear is generated through bombings and other forms of orchestrated terror, and the more this fear is emphasized by the media, it serves as an economic shock absorber and can prevent severe stock price declines from occurring. This was the formula used to halt the stock market slide of 2001 and also has been used to great effect ever since.

To see how "bombing support" has worked this year take a look at the graph provided below of the Dow Jones Industrial Average for the year to date. Notice how major terrorist bombings strategically bolstered the Dow at a number of points along the way and in some cases seemed to provide the market with some extra impetus:

January 19: Tel Aviv bombing

February 22: Iraqi sacred shrine bombing

April 11-12: Large and deadly series of bombings in Pakistan, Iraq, Sri Lanka and Baquila

June 14: Huge number of bombs exploded in Thailand, Afghanistan and Sri Lanka leaving a very large death toll

July 11: Large series of bombs exploded throughout India with a combined death toll of over 200

August 1: A record 100+ bombs exploded in Thailand

To take one example of how bombings are used as an economic pillar we need look no further than Sri Lanka, a land that has been a major target for bomb-toting terrorists. According to a recent report, Sri Lanka is expected to record its highest annual economic growth in 28 years despite escalating violence in the decades-old separatist conflict. Despite suffering a plethora of bombings this year, claiming at least 1,500 lives, the country's 24-billion dollar economy is booming with a staggering 8.1 percent growth in the first three months of 2006 and forecasts of 8.0 percent for the full year, analysts said, the best since 1978. Sri Lanka's government has recognized the perversely positive impact that terrorism can have upon economic performance and have invested heavily in this sordid enterprise. Media minister Anura Yapa made a winking reference to this when he told the press, "Hotels in Colombo are full....I don't think the violence has caused any big impact on the economy. The hotels are having a blast."

Earlier this month a bomb plot involving the use of several bomb-making components on a series of flights from Britain to the United States. The bomb plot was supposedly thwarted and made world headlines, underscoring the effects of fear and terror on the public psyche that have been fermenting since last year. Since the uncovering of this plot (and who knows just how real this plot was), officials have responded with typically mindless reactionary fervor: U.S. citizens are now prohibited from carrying liquids and gels and other items on planes. The greater the perceived threat that terrorism places on Americans, the more freedoms Americans are stripped of (or what a writer for the Christian Science Monitor has called the "new normal" for airplane passengers). This diminution of freedoms has been the pattern ever since 9/11 and the trend will undoubtedly continue from here and is in fact one of the hidden rationales behind orchestrated terrorism.

Another result that has followed the recent bomb plot has been a number of incidents across the country in which airports and other high- traffic public areas, including hospitals, have been evacuated and planes diverted at the slightest perception of a terrorism threat. In some cases there have been phony bomb threats made and the increase in such threats has been substantial since last week's foiled airline terror plot. All of these threats have proven to be false alarms. Yet the psychological effects are powerful and effective all the same. Public opinion and investor sentiment polls have consistently shown high levels of deep-seated fear. This fear is known to stock market investors as the proverbial "Wall of Worry" and is being engendered to effect many goals in the construction of the fully integrated global economy, including a margin of safety in the stock market.

One global economic theorist has said, "An emerging global economy needs a new paradigm on which it can function." Is it not possible - indeed, probable - that fear/terror is that "new paradigm" that will help generate the fully integrated global economy? The growing mountain of evidence overwhelmingly supports this conclusion.