The markets were full of contradictions last week. Take for example the turmoil in the Middle East. In past crises, investors flocked to the U.S. dollar. But not this time. The U.S. dollar futures contract fell to 76.41 last week.

Another contradiction: the U.S. jobs report was the best in two years, with 192,000 new jobs added. The stock market should have rallied strongly. Instead the Dow fell 88 points. The crises in Libya and elsewhere overshadowed the favorable jobs picture.

The trends that drove gold prices higher in 2010 are still in place. In the U.S., the Federal Reserve is buying $600 billion in treasuries in an attempt to keep interest rates low. Low interest rates encourage higher gold prices.

In Europe, the situation is still unstable. The European Central Bank (ECB) has stepped up its purchases of member nations' bonds. Spain is still on the table as a country teetering on verge of a bailout. Until the European mess is settled, gold remains a surrogate currency.

Spot gold in London hit $1,299.65. The December gold futures contract traded at $1,301.30, setting new record highs, as reported in Reuters.

Gold resumed its rally mode when the U.S. Federal Reserve indicated that it will provide more stimulus to the U.S. economy. That triggered commodities to move higher in anticipation of more inflation.

Developed countries are scrambling to put in place more rounds of stimulus to prop up their faltering economies.

The U.S. Federal Reserve has already pledged or spent an unbelievable $12.2 trillion to bail out a handful of bankers. The Fed slashed interest rates to zero and it is now purchasing more treasuries with proceeds from existing purchases. Finally, at its recent meeting the Fed stated that it stands ready to inject more stimulus in the economy.

Top central bankers and regulators from 27 countries have agreed on new rules for central banking, according to The New York Times.

Jean-Claude Trichet, president of the European Central Bank, said, "The agreements reached today are a fundamental strengthening of global capital markets." The agreement requires banks to raise the amount of common equity they hold to 7% of assets from 2%. Often known as Basel III, the group set a deadline of Jan. 1, 2013 for member nations to implement the rules.

U.S. markets sold off Tuesday amid fears of European debt defaults. On Wednesday, news that Greece's economy shrank by 1.8% in the second quarter didn't help ease those concerns.

Back in June, Greece was the center of a potential default crisis. The European Central Bank was forced to provide the member country with $140 billion in bailout funds. The bailout was orchestrated with the International Monetary Fund. Under the terms of the agreement, Greece was forced to impose austerity measures such as cutting public sector expenditures.

Ben Bernanke, chairman of the U.S. Federal Reserve, said on Thursday: "In the short term, I would believe that we should maintain a reasonable degree of fiscal support, stimulus for the economy."

That was yesterday. Today, Friday, Jean Claude Trichet, president of the European Central Bank, in an editorial for the Financial Times, called for public spending cuts and tax increases immediately across the industrialized world. Prolonging the stimulus would have "very limited" effect on growth, he wrote.

Trichet criticized the oversimplified message of fiscal stimulus -- "stimulate, activate, spend" -- given to all industrialized economies.

In Europe, both manufacturing and services output in the eurozone grew faster than expected. The European Commission also said that consumer confidence was at its highest level in July for more than two years.

When it comes to economic policy, it's difficult to plot the perfect path. Bernanke is an avid student of the 1930s depression and vows not to repeat the mistakes of that era. Trichet, on the other hand, is of the conservative European school of economics. He would prefer to err on the side of fiscal conservatism. Bernake would continue to use public money, if needed. He has already used $11.2 trillion of taxpayer money to prop up U.S. bank. The shift of this vast amount of money from taxpayers to the private banking sector is unprecedented in world history. Whether he should continue this policy is open to debate.

Do you believe that Trichet is right to cut spending and raise taxes?

Both the Bank of England (BOE) and the European Central Bank (ECB) signaled they believe their economies need further help from cheap money as they announced Thursday morning that they will be leaving interest rates low and unchanged.

The BOE left interest rates at 0.5% -- where they have been since March 2009. The ECB left interest rates at 1% -- the same level they have been at since May 2009.

So, how is that Summer of Recovery working out? Following Tuesday's drop, the market was slightly lower Wednesday morning thanks in part to the ADP payroll report. According to the report, employers added 13,000 jobs in June, falling short of the consensus estimate for 60,000 jobs. This data looks at private-sector jobs only and suggests that payroll gains were tame in June thanks to small businesses that were cutting jobs.

All of Wednesday morning's news wasn't bad, as the European Central Bank (ECB) offer of three-month funds came in short of expectations. This data means that the region's banks may not be as ECB-dependent as some thought. In addition, the financial sector is prospering as the exposure to European banks was made to appear a bit less toxic. Furthermore, Democrats in Congress decided to take a bank tax off the table in the new financial overhaul bill. This move has helped bring Republicans on board and makes the bill look like it may pass.

Spanish banks are scrambling to borrow record amounts from the European Central Bank (ECB) for fear that they will not be able to borrow from international capital markets.

Last month, Spanish banks borrowed 85.6 billion euros from the ECB, double the amount borrowed during the Lehman collapse, and amounting to 16.5% of all loans granted by the ECB. This is the highest amount since the launch of the eurozone in 1999.

With reference to the Greek debt crisis, Moody's said: "banking systems faced very real common threats if doubts were raised about their governments' abilities to pay debts."

Moody's was referring specifically to the UK, Irish, Italian, Portuguese and Spanish banking systems. Banks shares have fallen sharply across Europe. In France, Societe Generale (SCGLY) was the biggest loser, with its share price falling 7%. It holds $3.8 billion of Greek government debt.

When the financial meltdown occurred, the U.S. Federal Reserveslashed interest rates to zero and bought U.S. treasuries to keep interest rates low.

The European Central Bank (ECB), which represents the 16 countries in the eurozone, does not have this power. Nevertheless, investors are looking for the ECB to intervene in the markets to stem the fall of the euro. In fact, ECB president said the matter was not discussed at their recent meeting.

European Central Bank President Jean-Claude Trichet, who earlier relaxed lending rules for one country, diluted the lending rules for a second time Tuesday by announcing that the ECB will continue to indefinitely accept Greek bonds as collateral despite their downgrade by ratings agencies, Bloomberg News reported.

The move came after rumors pervaded the stock, bond, and currency markets Tuesday that Spain may need a European Union and/or International Monetary Fund aid package to stabilize its financial situation. Spain Tuesday rejected the assertion. The euro tumbled Tuesday, nonetheless, weakening about 2 cents versus the dollar to $1.3014 in afternoon trading.

Thursday's events in Europe provided some encouragement, if not universal calm, regarding the Greek debt saga, including the promise that Europe and the International Monetary Fund will now move relatively swiftly to put together a suitable package that will assist the Mediterranean nation's transition to fiscal solvency.

But even if Europe again show signs of "snatching defeat from the jaws of victory," investors should not anticipate a sudden return to the barter system, globally.

The head of one of the world's most powerful central banks is on record with his view that Greece's fiscal crisis should be resolved via a Europe-centric solution.

A day after Greek Prime Minister George Papandreou said his government may go to the International Monetary Fund for aid, if needed, European Central Bank President Jean-Claude Trichet said he doesn't see that as a suitable option.

"I don't trust that it would be appropriate to have the introduction of the IMF as a supplier of help," Trichet said at press conference, Bloomberg News reported Thursday. However, Trichet also praised the IMF for providing Greece with technical assistance as it addresses its budget deficit, marketwatch.com reported Thursday.