Here's what happens in a globalized world

The Fed chairman warns of fast-rising prices. The American stock market falls. The Japanese stock market falls. The dollar gains ground against the yen in foreign exchange markets.

Arguably, the biggest part of Ben Bernanke's job as chairman of the Federal Reserve Board in Washington is to keep a lid on inflation. If he thinks prices are going to accelerate upwards, it's because of the data he receives - sometimes before the rest of the world - about the American economy. He applies the brake by shrinking the money supply, thus making short-term credit harder to obtain.

American businesses start worrying that they won't be able to invest and produce as much in the future. The stock market, where share prices depend on expectations for future profits, falls. The Japanese market falls, too, perhaps in part because of worries about lower demand for imports in the United States.

The dollar gains value against the yen as investors anticipate relatively higher returns on American assets - because of higher interest rates in the United States, lower profits in Japan, or both. And it all happens within minutes.