Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and edited [..] excerpts from Gonzalo Lira’s (http://gonzalolira.blogspot.com) original article* for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Lira goes on to say:

Why? Because the economy is in no better shape than it was in September 2008—and both the Federal Reserve and the Federal government have shot their wad. They got nothin’ left after [spending] trillions in stimulus and trillions more in balance sheet expansion. [The only thing] they have accomplished… is to undermine Treasuries… [to make] Treasuries… the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.

[The above being the case,] the Fed has bought up assets of all kinds, in order to inject liquidity into the system, and bouy asset price levels so as to prevent this deflationary deep-freeze… but this Fed policy—call it “money-printing”, call it “liquidity injections”, call it “asset price stabilization”—has been overwhelmed by the credit contraction… [in spite of] expanding its balance sheet from some $900 billion in the Fall of ’08, to about $2.3 trillion today. [While it is true that] the Fed has been able to alleviate the worst effects of the deflation, it has not turned the deflationary environment into anything resembling inflation. Yields are low, unemployment up, CPI numbers are down (and under some metrics, negative)—in short, everything screams “deflation”. Therefore, the notion of talking about hyperinflation now, in this current macro-economic environment, would seem . . . well . . . crazy. Right? Wrong! I would argue that the next step down… will be hyperinflation.

Most people dismiss the very notion of hyperinflation occurring in the United States as something only tin-foil hatters, gold-bugs, and right-wing survivalists drool about. In fact, most sensible people don’t even bother arguing the issue at all – everyone knows that only fools bother arguing with a bigger fool. [Nevertheless,] a minority actually do go ahead and go through the motions of talking to the crazies ranting about hyperinflation. These amiable souls diligently point out that in a deflationary environment where commodity prices are more or less stable – there are downward pressures on wages, asset prices are falling, and credit markets are shrinking – inflation is impossible [and,] therefore, hyperinflation is even more impossible.

What Hyperinflation is NOT
The [above] outlook seems sensible if we fall for the trap of thinking that hyperinflation is an extention of inflation. If we think that hyperinflation is simply inflation on steroids… then it would seem to be the case that, in our current deflationary economic environment, hyperinflation is not simply a long way off, but flat-out ridiculous [to even contemplate] but hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same because in both cases the currency loses its purchasing power but they are not the same.

What (Hyper)inflation IS
Inflation is when the economy overheats. It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.

Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money [but that] they want less of the currency [and, as such,] they will pay anything for a good which is not the currency.

The Current Situation
Right now, the U.S. government is indebted to about 100% of GDP, with a yearly fiscal deficit of about 10% of GDP, and no end in sight. For its part, the Federal Reserve is purchasing Treasuries, in order to finance the fiscal shortfall, both directly (the recently unveiled QE-lite) and indirectly (through the Too-Big-To-Fail banks). The Fed is satisfying two objectives: One, supporting the government in its efforts to maintain aggregate demand levels, and two, supporting asset prices, and thereby prevent further deflationary erosion. The Fed is calculating that either path—increase in aggregate demand levels or increase in aggregate asset values—leads to the same thing: A recovery in the economy.

A recovery [in the economy] is not going to happen—that’s the news we’ve been getting as of late. Amid all this hopeful talk about “avoiding a double-dip”, it turns out that we didn’t avoid a double-dip—we never really managed to claw our way out of the first dip. No matter all the stimulus, no matter all the alphabet-soup liquidity windows over the past 2 years, the inescapable fact is that the economy has been, and is, headed down.

How Hyperinflation Will Happen
1. One day… there will be a commodities burp – a slight but sudden rise in the price of a necessary commodity, such as oil.

2. This will jiggle Treasury yields, as asset managers reduce their Treasury allocations and go into the pressured commodity, in order to catch a profit. (Actually it won’t even be the asset managers – it will be their programmed trades – and these asset managers will sell Treasuries because, effectively, it has become the principal asset they have to sell.)

3. Bernanke and the Fed will buy Treasuries, in an effort to counteract the sell-off and maintain low yields in order to discourage deflation.

4. The Fed’s buying of Treasuries will occur in such a way that it will encourage asset managers to dump even more Treasuries into the Fed’s waiting arms. This dumping of Treasuries won’t be out of fear, at least not initially. Most likely, in the first 15 minutes or so of this event, the sell-off in Treasuries will be orderly, and carried out with the idea (at the time) of picking up those self-same Treasuries a bit cheaper down the line.

5. The Fed will interpret this sell-off as a run on Treasuries (the Fed is already attuned to the bond markets’ fear that there is a “Treasury bubble” so the Fed will open its liquidity windows, and buy up every Treasury in sight, precisely so as to maintain “asset price stability” and “calm the markets”.

6. The Too-Big-To-Fail (TBTF) banks will play a crucial part in this game. Seeing this run on Treasuries, will add to the panic by acting in their own best interests. They will be among the first to step off Treasuries. They will be the bleeding edge of the wave.

7. Here the panic phase of the event begins. Asset managers, on seeing this massive Fed buy of Treasuries and the TBTF banks selling Treasuries, will dump their own Treasuries en masse. They will be aware how precarious the U.S. economy is, how over-indebted the government is, how U.S. Treasuries look a lot like Greek debt. They’re not stupid: Everyone is aware of the idea of a “Treasury bubble” making the rounds… so when the Fed begins buying Treasuries full-blast to prop up their prices, these asset managers will all decide, “Time to get out of Dodge—now.”

Note how it will not be China or Japan who all of a sudden decide to get out of Treasuries—those two countries will actually be left holding the bag. Rather, it will be American and (depending on the time of day when the event happens) European asset managers who get out of Treasuries first. It will be a flash panic—much like the flash-crash of last May. The events I describe above will happen in a very short span of time—less than an hour, probably – but unlike the event in May, there will be no rebound.

Notice, too, that Treasuries will maintain their yields in the face of this sell-off, at least initially. Why? Because the Fed, so determined to maintain “price stability”, will at first prevent yields from widening—which is precisely why so many will decide to sell into the panic. The Bernanke Backstop won’t soothe the markets—rather, it will make it too tempting not to sell.

8. The first of the asset managers or TBTF banks who are out of Treasuries will look for a place to park their cash – and they will go to commodities. By the end of that terrible day, commodites of all stripes—precious and industrial metals, oil, foodstuffs—will shoot the moon. It will not happen because ordinary citizens have lost faith in the dollar (that will happen in the days and weeks ahead) but because, once Treasuries are not the sure store of value, commodities will be perceived as the only sure store of value.

It won’t be commodity ETF’s, or derivatives—those will be dismissed (rightfully) as being even less safe than Treasuries. Unlike before the Fall of ’08, this go-around, people will pay attention to counterparty risk. So the run on commodities will be for actual, feel-it-’cause-it’s-there commodities. By the end of the day of this panic, commodities will have risen between 50% and 100%. By week’s end, we’re talking 150% to 250%. (My private guess is gold will be finessed, but silver will shoot up the most—to $100 an ounce within the week.)

9. Of course, once commodities start to balloon ordinary citizens will get their first taste of hyperinflation. They’ll see it at the gas pumps. If oil spikes from $74 to $150 in a day, and then to $300 in a matter of a week—perfectly possible, in the midst of a panic—the gallon of gasoline will go to, what: $10? $15? $20?

So what happens then? People—regular Main Street people—will be crazy to buy up commodities (heating oil, food, gasoline, whatever) and buy them now while they are still more-or-less affordable, rather than later, when that $15 gallon of gas shoots to $30 per gallon.

10. If everyone decides at roughly the same time to exchange one good—currency—for another good—commodities—what happens to the relative price of one and the relative value of the other? Easy: One soars, the other collapses. When people freak out and begin panic-buying basic commodities, their ordinary financial assets—equities, bonds, etc.—will collapse: Everyone will be rushing to get cash, so as to turn around and buy commodities. So immediately after the Treasury markets tank, equities will fall catastrophically, probably within the next few days following the Treasury panic. This collapse in equity prices will bring an equivalent burst in commodity prices—the second leg up, if you will.

11. This sell-off of assets in pursuit of commodities will be self-reinforcing: There won’t be anything to stop it. As it spills over into the everyday economy, regular people will panic and start unloading hard assets—durable goods, cars and trucks, houses—in order to get commodities, principally heating oil, gas and foodstuffs. In other words, real-world assets will not appreciate or even hold their value, when the hyperinflation comes.

This is something hyperinflationist-skeptics never quite seem to grasp: In hyperinflation, asset prices don’t skyrocket—they collapse, both nominally and in relation to consumable commodities. A $300,000 house falls to $60,000 or less, or better yet, 50 ounces of silver—because in a hyperinflationist episode, a house is worthless, whereas 50 bits of silver can actually buy you stuff you might need.

Neither the Federal Government Nor the Federal Reserve Will Be Able to Curtail Hyperinflation
Right now, I’m guessing that sensible people who’ve read this far are dismissing me as being full of shit—or at least victim of my own imagination. These sensible people, if they deign to engage in the scenario I’ve outlined above, will argue that the government—be it the Fed or the Treasury or a combination thereof—will find a way to stem the panic in Treasuries (if there ever is one), and put a stop to hyperinflation (if such a foolish and outlandish notion ever came to pass in America).

Uh-huh: So the Government will save us, is that it? Okay, so then my question is, How?

Let’s take the Fed: How could they stop a run on Treasuries? Answer: They can’t. See, the Fed has already been shoring up Treasuries—that was their strategy in 2008—’09: Buy up toxic assets from the TBTF banks, and have them turn around and buy Treasuries instead, all the while carefully monitoring Treasuries for signs of weakness. If Treasuries now turn toxic, what’s the Fed supposed to do? Bernanke long ago ran out of ammo: He’s just waving an empty gun around. If there’s a run on Treasuries, and he starts buying them to prop them up, it will only give incentive to other Treasury holders to get out now while the getting’s still good. If everyone decides to get out of Treasuries, then Bernanke and the Fed can do absolutely nothing effective. They’re at the mercy of events—in fact, they have been for quite a while already. They just haven’t realized it.

Well if the Fed can’t stop this, how about the Federal government—surely they can stop this, right?

In a word, no. They certainly lack the means to prevent a run on Treasuries. As to hyperinflation, what exactly would the Federal government do to stop it? Implement price controls? That will only give rise to a rampant black market. Put soldiers out on the street? America is too big. Squirt out more “stimulus”? Sure, pump even more currency into a rapidly hyperinflating everyday economy—right . . . (BTW, I actually don’t think that politicians are so stupid as to actually start printing money to “fight rising prices”—but hey, when it comes to stupidity, you never know how far they can go.)

In fact, the only way the Federal government might be able to ameliorate the situation is if it decided to seize control of major supermarkets and gas stations, and hand out [coupon] cards of some sort, for basic staples—in other words, food rationing. This might prevent riots and protect the poor, the infirm and the old—it certainly won’t change the underlying problem, which will be hyperinflation.

“This is all bloody ridiculous,” I can practically hear the hyperinflation skeptics fume. “We’re just going through what the Japanese experienced: Just like the U.S., they went into massive government stimulus—hell, they invented quantitative easing—and look what’s happened to them: Stagnation, yes—hyperinflation, no.” That’s right: The parallels with Japan are remarkably similar—except for one key difference. Japanese sovereign debt is infinitely more stable than America’s, because in Japan, the people are savers—they own the Japanese debt. In America, the people are broke, and the Nervous Nelly banks own the debt. That’s why Japanese sovereign debt is solid, whereas American Treasuries are soap-bubble-fragile.

How to Prepare For This Hyperinflationary Event
Neanderthal survivalists spend all their time thinking about post-Apocalypse America. The real trick, however, is to prepare for after the end of the Apocalypse.

The first thing to realize, of course, is that [while] hyperinflation might well happen, it will end. It won’t be a never-ending situation. After a spell of hyperinflation, America will end up pretty much like it is today—only with a bad hangover. [In fact,] a hyperinflationist spell might be a good thing. It would finally clean out all the bad debts in the economy, the crap that the Fed and the Federal government refused to clean out when they had the chance in 2007–’09… [Indeed,] a hyperinflationist catastrophe might in the long run be better for the health of the U.S. economy and the morale of the American people, as opposed to a long drawn-out stagnation.

Like Rothschild said, “Buy when there’s blood on the streets.” The things to do to prepare for hyperinflation would be to:
1. Invest in a diversified hard-metal basket before the event—no equities, no ETF’s, no derivatives.
2. If and when hyperinflation happens, and things get bad (and I mean really bad), take that hard-metal basket and, right in the teeth of the crisis
a) buy residential property
b) buy equities in long-lasting industries [such as] mining, pharma and chemicals… and avoid companies that offer no value-added like tech, aerospace or industrials.
The reason is, at the peak of hyperinflation, the most valuable assets will be dirt-cheap—especially equities—especially real estate.

Expect a New Normal
I have no idea what will happen after we reach the point where $100 is no longer enough to buy a cup of coffee—but I do know that, after such a hyperinflationist period, there’ll be a “new dollar” or some such, with a few zeroes knocked off the old dollar, and things will slowly get back to a new normal. I have no idea the shape of that new normal [but] I wouldn’t be surprised if that new normal has a quasi or de facto dictatorship, and certainly some form of wage-and-price controls.

Conclusion
The current situation cannot long continue. The Global Depression we are in is being exacerbated by the very measures being used to fix it—stimulus is putting pressure on Treasuries, which are being shored up by the Fed. This obviously cannot have a happy ending. Therefore, the smart money prepares for what it believes is going to happen next.

I think there’ll be hyperinflation in America—that bubble’s soon to pop. I’m guessing if it doesn’t happen this fall, it’ll happen next fall, without question before the end of 2011.

*http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.html To read his follow-up article (unedited) on the subject see: http://gonzalolira.blogspot.com/2010/08/hyperinflation-part-ii-what-it-will.html#more

- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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So says an article* at http://theeconomiccollapseblog.com entitled “15 Economic Statistics That Keep on Getting Worse.” Below Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, presents further reformatted and edited [..] excerpts from the article for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) The article goes on to say:

The U.S. government can continue to try to pump up with economy with more debt, but the reality is that there is not going to be a legitimate “recovery” until consumer spending rebounds. Consumer spending makes up the vast majority of U.S. GDP. Without good jobs, however, consumers are not going to be able to spend money and, unfortunately, our jobs base continues to be erode as millions upon millions of middle class jobs are shipped over to China, India and dozens of third world nations by the global predator corporations that now dominate the world economy. So where does that leave middle class American “consumers”? Well, it leaves us in a world of hurt.

15 Key Economic Statistics That Just Keep Getting Worse

1. The number of Americans who are receiving food stamps rose to a new all-time record of 40.8 million in May and has set a new all-time record for 18 months in a row. There is every indication that things are going to get even worse. The U.S. Department of Agriculture projects that the number of Americans on food stamps will increase to 43 million in 2011.

2. The U.S. economy lost 131,000 more jobs during the month of July… and has lost 10.5 million jobs since 2007. Meanwhile, immigrants (both legal and illegal) continue to pour into this nation in unprecedented numbers.

3. Americans who are out of work are finding it incredibly difficult to get back into the workforce with the average time needed to find a job having risen to an all-time record of 35.2 weeks.

4. The U.S. government keeps trying to pump up the economy with debt, and in the process things are getting wildly out of control. According to a U.S. Treasury Department report to Congress, the U.S. national debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015.

5. The interest on all of this debt is becoming increasingly oppressive. As of July 1st, the U.S. government had spent $355 billion so far in 2010 on interest payments to the holders of the national debt. The total for 2010 should be somewhere in the neighborhood of $700 billion… and $2 trillion… by 2020. Keep in mind that the entire U.S. government budget is less than $4 trillion for the entire year of 2010.

6. If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the annual U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion.

7. Social Security will pay out more in benefits in 2010 than it receives in payroll taxes. This was not supposed to happen until at least 2015. In the years ahead, these new “Social Security deficits” are projected to be absolutely catastrophic.

8. There are simply far too many retirees and not nearly enough workers to support them. Back in 1950 each retiree’s Social Security benefit was paid for by 16 workers. Today, each retiree’s Social Security benefit is paid for by approximately 3.3 workers. By 2025 it is projected that there will be approximately two workers for each retiree.

9. Wealth continues to become highly concentrated at the top. Since 1973, the average CEO’s salary has increased from 26 times the median income to over 300 times the median income.

10. According to a poll taken in 2009, 61 percent of Americans “always or usually” live paycheck to paycheck. That was up significantly from 49 percent in 2008 and 43 percent in 2007.

11. The Mortgage Bankers Association recently announced that more than 10% of all U.S. homeowners with a mortgage had missed at least one mortgage payment during the January to March time period. That was a new all-time record and represented an increase from 9.1 percent a year ago.

12. A recent survey of last year’s college graduates found that 80 percent moved right back home with their parents after graduation. That was up substantially from 63 percent in 2006.

13. During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.

14. The total number of U.S. bank failures passed the 100 mark in July of this year. In 2009, the total number of U.S. bank failures did not pass the century barrier until October.

15. The U.S. dollar continues to rapidly decline in value. An item that cost $20.00 in 1970 would cost you $112.35 today. An item that cost $20.00 in 1913 would cost you $440.33 today.

Any rational observer… can see that the foundations of the U.S. economy are coming apart. The rapidly accumulating mountain of debt that has fueled our “prosperity” is impossible to repay and is going to progressively choke the life out of our economic system. The good jobs that we have allowed to be shipped out of our country are never coming back. Every single day, more wealth flows out of this country than flows into it.

Anyone who claims that things are getting “better” is either ignorant, completely deluded or is purposely lying. The U.S. economy is not getting “better”. The U.S. economy is dying. Adjust your plans accordingly.

*http://theeconomiccollapseblog.com/archives/15-economic-statistics-that-just-keep-getting-worse

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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So says Paul Mladjenovic (http://www.RavingCapitalist.com) in an article* entitled “Inflationary Depression Forecast Revisited…We are Half-Way There”. Below Lorimer Wilson, editor of www.munKNEE.com, presents further reformatted and edited [..] excerpts from the article for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Mladjenovic goes on to say:

My Forecast
1. Continuing Depression
The trillion-dollar spending policies enacted during the late Bush years and now the Obama years are extraordinarily dangerous. The federal government (and the state & local governments, too) are spending beyond our means as well as theirs. Bankruptcies, foreclosures, business contraction and unemployment are certainly at depression-level. Talk of a recovery is wishful thinking since the effects of still more bad policies are on the horizon.

Right now we have:
a) Unemployment at 17%
(I am not talking about the much reported yet highly inaccurate “official unemployment rate” which is a sham; I am talking about what is called the “U-6” employment rate that the Bureau of Labor Statistics compiles. It is a much less reported yet more accurate measure of unemployment. This statistic includes those counted in the “official unemployment rate” and adds in those that dropped out of the job search; the so-called “discouraged” unemployed. U-6 also includes those that are “under-employed” which means those that want full employment but have had to settle for part-time employment.)

b) Foreclosures at all-time highs

c) Bankruptcies at all-time highs

d) Personal debt still at record levels

e) Government debt at all-time high (and still soaring)

Now, couple the above list with [the fact that]:
a) The tax-cuts enacted in the past decade are set to expire by January 2011
If they do, in fact, expire the effect is a tax increase that would deliver a body-blow to an already weak economy. A tax increase is nothing more than money taken by force by the government from the private economy. Basically that would mean less income and less invest-able capital for the private sector as the government forcibly siphons these resources and redirects it to a bureaucracy that is already the biggest in American history.

b) [There is talk about the possible introduction] of a Value Added Tax (VAT)
A VAT is a dumb during good economic times and quite stupid during bad economic times. Even the name is idiotic since taxes don’t add “value”…it merely increases the price or cost of that particular product or service.

c) [Consideration is being given to the passing of] Cap and Trade legislation
[Such legislation] would raise energy costs greatly since the legislation is nothing more than a huge hidden tax on energy usage. [In fact,] it would do little or nothing for the environment but it would do much harm to our economy.

Summary
If taxes, regulations and other burdens and risks are not decreased immediately and substantially, then this depression will continue.

2. Inflation
Inflation is not an “if” but a “when”. As the federal reserve keeps creating trillions of dollars out of thin air, there will be consequences. Technically, they are indulging in “monetary inflation” but of course most people think of inflation by its symptom which is “price inflation”. Since many observers don’t see price inflation, they assume that deflation is winning the day and will be here for the foreseeable future. This is wrong. Inflation will become evident when two conditions occur:
1. The excessive creation of money (again, this is “monetary inflation”)
2. When this money circulates through the economy (also referred to as “velocity”)

“Human Needs” Commodities
If the government creates trillions of dollars and these dollars do not circulate, then velocity will not occur. Just keep in mind that “velocity” occurs where there is DEMAND. There are many areas where there is simply no substantial demand, such as housing and autos, so money will not flow there in this economic environment. However, money does flow to areas of “human need” – and this is a key reason why I am a long-term bull on commodities in general and “human need” commodities in particular. For example, the price of wheat has gone up 71% during the past 12 months and I think that similar price movements (or higher!) are in store for many [such] essentials.

Store of Value Commodities
I also believe that gold and other precious metals such as silver will continue their bull market. Why? Because, as inflation unfolds among essential commodities, people will need a “store of value” as the world’s major currencies keep on being over-produced. When people start to see that the dollars they hold (or other currency) start to lose value as the government over-produces it, they will then see that having cash is not a “safe harbor”; inflation will erode its value. They will then seek to replace currencies that are “depreciating” or losing value and shifting their resources to that which holds value…gold and silver.

In fact, as people world-wide see the problems with fiat currencies such as the U.S. dollar, euro, etc., and with paper assets such as stocks and bonds, etc., they will migrate into those things that will hold value or appreciate over time. The flight will be from “paper” to “stuff”. “Stuff” like precious metals, food, water and other essentials.

Summary
There will be little or no inflation in those things that people do not need. The corollary to that (and this goes back to my forecast) is this: There will be severe inflation – even hyperinflation – in those things that people do need. We have a huge world population and their needs will be addressed. When you couple this demand with expanding money supplies across the globe, rising prices will be the result. The stage is being set for historic price inflation in those commodities that are “essential”.

Investors need to prepare [for an inflationary depression which is half way here already].

*http://mladjenovic.blogspot.com/2010/08/inflationary-depression-forecast.html (Mladjenovic offers an audio seminar “Cash in on the Commodities Super Bull Market” and also a free financial newsletter at www.RavingCapitalist.com.)

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is permitted provided full credit is given.
- Sign up to receive every article posted via Twitter, Facebook or RSS feed.
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Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and slightly edited [..] excerpts from Andy Harless’ (http://blog.andyharless.com/) original article* for the sake of clarity and brevity to ensure a fast and easy read. Harless goes on to say:

Here is what I see as the case for and against a second dip. As you will see, I am more skeptical about the case against.

The Case for a Second Dip
1. The Fed’s policy of quantitative easing, which was temporarily buttressing demand, is over, and its impact will likely decline over time, imparting a downward bias to growth in the coming quarters.

2. This fiscal stimulus, which was temporarily buttressing demand, has been largely exhausted and has likely reached its point of peak impact (even if additional fiscal measures are taken), so that its impact will be declining in the coming quarters, imparting a downward bias to growth.

3. Pent-up demand from consumers (many of whom were worried about losing their jobs last year but no longer are) has been largely exhausted, and its impact will likely decline over time, imparting a downward bias to growth in the coming quarters.

4. The process of inventory adjustment has run its course, and firms have been able to increase production again to maintain inventories at the new, lower level and to begin slightly increasing inventories in anticipation of a recovery.

5. Significant increases in production are no longer necessary to maintain inventories, so that an upward bias that has been imparted to growth in recent quarters will no longer be present in future quarters.

6. With the dollar relatively strong again and the pace of world recovery expected to slow, export growth, which had offered the possibility of a robust recovery, no longer seems to offer that possibility.

7. Normally, the surge in productivity at the beginning of a recovery is followed by a surge in employment. They typical lag is about two quarters. Last year’s surge in productivity took place over the last three quarters of the year, which suggests that a surge in employment should have taken place beginning in the last quarter of last year and continuing through the current quarter. Aside from temporary census employment, the anticipated surge does not appear to be taking place. Meanwhile, productivity growth has settled back into the normal range, which dampens hope for a future surge in employment.

8. The Bush tax cuts expire at the end of 2010, creating an incentive for high-income individuals (and their corporate agents) to shift income out of 2011 into 2010. To the extent that they are successful in doing so, and to the extent that the shifted income is associated with actual economic activity taking place during the period in which it is declared, we should expect a downward bias to growth between 2010 and 2011.

Given all these negatives, there is no evidence of any positive stimulus to growth that would offset them. The financial panic of late 2008 subsided long ago, and the residual financial weakness is lifting very slowly, with no suggestion that the pace of improvement will accelerate, especially in light of potential fallout from financial difficulties in Europe. With capital ratios still an issue, the current regulatory environment is not conducive to rapid increases in bank lending.

The Case Against a Second Dip
1. In the years since the Great Depression, there is no precedent for a long recession (longer than 8 months, in this case about 18 months) followed by a short recovery (shorter than 35 months). The two closest “double dip” examples (both with first dips lasting 8 months or less) are 1980 – when the second dip was essentially intentional on the part of the Fed – and 1960 – when the economy had already made nearly a full recovery by the time the new dip happened. On the other hand, double dips appear to have been fairly common in the years before the Great Depression, so the validity of this piece of evidence depends on the premise that something (the fixed gold standard?) fundamentally changed in the 1930’s and has not since reverted.

2. Recessions seldom begin when the unemployment rate is already high. In particular, since the end of the Great Depression, we have not seen a recession begin with an unemployment rate greater than 7.5 percent. (Today it is 9.7 percent.) Having said that, though, I should note that the second dip of the Great Depression began with an unemployment rate of over 14 percent. (Presumably the reason this happened in the 1930’s is that fiscal and monetary policy were tightened, whereas in subsequent cycles, fiscal and monetary policy have generally been loosened when the unemployment rate remained very high. Unfortunately, in light of the first two points adduced in favor of a second dip, this contrast doesn’t bode well for the immediate future.)

3. Recessions are normally preceded by stock market declines of greater severity than what we have seen recently. (Of course, if your concern is whether to own stock, the fact that the stock market has not yet had a large decline isn’t much of a comfort.)

4. Credit spreads do not suggest a high risk of recession. (Again, if your concern is whether to own bonds, this is not much comfort. But perhaps the stock and bond markets should find each other’s lack of severe concern reassuring.)
The price of oil has been reasonably stable, not exhibiting the sort of spike that has helped induce most of the post-WWII recessions. (However, since the second dip, if it happens, is likely to have deflationary characteristics, we need to be concerned that any lack of strength in commodities such as oil could be in anticipation of a second dip.)

5. The yield curve (difference between long-term and short-term interest rates) is unusually steep. Recessions normally begin with a flat yield curve. Short-term interest rates normally fall during a recession, whereas a steep yield curve suggests rather that short-term rates are expected to rise. However, as Paul Krugman points out, this usual interpretation doesn’t apply now. If there is a second dip, short-term rates will not fall, because there is nowhere down for them to go. Under these circumstances, the steep yield curve likely only indicates the possibility of a rise in short-term rates (without the offsetting possibility of a fall), not the likelihood of a rise. In fact, it could be argued that the steep yield curve is reason to worry more about a second dip: in linear models, a false signal from the unusually steep yield curve could easily outweigh other indicators that are showing valid, but less intense, signs of trouble. (For example, the stock market hasn’t declined dramatically, but it has declined. Should we be worried? Ordinarily, with such a steep yield curve, the answer would be an unambiguous “no.” Today, we’re likely to hear that “no” from linear models, but it could well be based on a single indicator giving a flawed signal.)

It’s possible that the case for a second dip is basically right but that we still don’t technically get one. With normal productivity growth and population growth, we could have a severe slowdown, involving maybe one quarter of negative growth, or two quarters of very slightly negative growth, or three quarters of very slightly positive growth, and it might not qualify as a recession. Obviously, it would still suck.

What worries me particularly is that, even if the case for a second dip is completely wrong, the employment picture going forward is still dismal, and there is still a case for deflation.

*http://blog.andyharless.com/ (Dr. Harless Andy Harless is an economist specializing in macroeconomics and is Chief Economist at Atlantic Asset Management and co-author of “The Indebted Society” with James Medoff – see below.)

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See larger image The Indebted Society: Anatomy of an Ongoing Disaster (Hardcover) By (author) James L. Medoff, Andrew Harless List Price: $24.95 USD New From: $3.50 In Stock Used from: $0.01 In Stock

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and edited excerpts from Robert Morley’s (www.The Trumphet.com) original article* for the sake of clarity and brevity to ensure a fast and easy read. Morley goes on to say:

27% Have Savings of Less Than $1,000
According to Jack VanDerhei, research director for the Employee Benefit Research Institute (EBRI), the percentage of American workers with virtually no retirement savings grew for the third straight year. Of the over 1,000 workers and retirees surveyed who were over the age of 25, a whopping 27 percent said they had less than $1,000 in savings. That’s up by over 7 percent from last year.

43% Have Savings of Less Than $10,000
The percentage of workers who said they have less than $10,000 in savings (the equivalent of 3 months’ worth of average yearly salary) jumped to 43 percent, up 4 percent from 2009.

Average American Goes $300 Further into Debt Each Month
The great American recession is already taking its toll, despite still being in its early stages. On average, U.S. consumers are going $300 in the hole per month after all expenses are met, says John Lekas, senior portfolio manager for Leader Short-Term Bond Fund.

Lekas says conditions are only going to get worse, as real unemployment (as measured by the government U6 number) heads toward 25 percent over the next couple of years. Indeed, for many families, conditions would already have been much worse had governments not borrowed billions to pay out extended unemployment benefits, food stamps and other welfare.

Only 16% Think They Will Have Enough Savings for Retirement
It is no wonder that the EBRI report found that only 16 percent of respondents were confident in their ability to save enough for retirement. The finding was the second lowest in 20 years and is especially ominous because many of these workers are probably expecting to rely heavily upon Social Security and Medicare benefits—two massive and currently unfunded government liabilities. Social Security is already bankrupt (the government is borrowing money to make payments) and Medicare is projected to have a $38 trillion deficit over the course of the baby boom generation.

Politicians Also Have Their Heads in the Sand
The nation’s retirement safety net is looking more precarious than ever. With national health care, the wars in Afghanistan and Iraq, Iran seeking nuclear weapons, pirates preying on American shipping, and jobs being offshored to Asia, don’t expect much political action because it is far easier for politicians to bury their heads in the sand.

Public Pension Plans Gambling on Outsized Future Returns
Even among those who recognize the debt problem facing America, the desperation is akin to chickens running around with their heads cut off. Public pension plans are facing a massive crisis too, the New York Times reports. All across the country, state and local pension plans are chronically underfunded.

Governments have promised big, but put aside little. Instead of admitting they had been lying to their workers (basing predictions on ridiculously high estimates of future investment returns), and telling voters that they need to start paying higher taxes to fund civil servant retirement plans, states and other government bodies are trying to get back into the money by heading to the casino.

The Times reveals that most government pension plans have based their pension plan funding on the assumption that stocks will return an astounding 9.5 percent yearly growth on average, and that bonds will pay about 5.75 percent. Both suppositions have been shown to be ridiculously high. Even considering the current stock market rally, the Dow Jones Industrial Average is still below levels seen 10 years ago. The Nasdaq is much further underwater. As for government bonds, even the longest dated ones pay only 4.68 percent. A one-year bond pays only 0.37 percent.

Commodity futures, junk bonds, foreign stocks, mortgage-backed securities, leveraged investing, credit default swaps, exotic derivatives—are now all on the table for many desperate pension funds. As any casino patron knows, however, for every winner, there are many losers.

It is time Americans pull their heads out of the sand. The current relatively light economic crisis is only the beginning. A stampede is headed in this direction, and when the money is gone, many are going to get trampled.

*http://www.theTrumpet.com/index.php?q=7035.5570.0.0

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In further edited excerpts from an article* by Prieur du Plessis (www.investmentpostcards.com) Richard Russell has the following to say in his latest Dow Theory Letters:

(1) Goldman Sachs – Dumb and Decent or Smart and Sleazy?
The “smartest guys on Wall Street,” are under siege. What’s the complaint? These guys sold poisoned pill-products to their customers, and then made billions of dollars selling short the products they sold to their customers. Goldman has to decide whether to plead dumb and innocent or smart and sleazy. Of course, they’ll plead dumb and decent (“they had no idea of what was going on”).

(2) Gold – The Only Safe Currency?
Managers of sovereign funds don’t know where safety is. They know it’s not in euros, and they suspect it’s not in U.S. dollars. What’s left? Could it be that gold is no longer seen as “just another commodity,” but increasingly accepted as the “only safe currency”? China and Russia think so. I think so too.

(3) Sovereign Debt Bailout – Who’s Next?
[With] Greece’s [$162B] bailout, will Portugal and Italy and Ireland be next?

(4) Stock Market – Topping Out?
My suspicion that the stock market is tracing out a major top is becoming stronger. The stock market is loaded with amateurs who have been hoping to recoup their losses. If the stock market is actually topping out here, the public is going to turn black bearish. A major stock market decline now would play havoc with the still shaky U.S. economy.

(5) Real Estate Market – New Lows?
In the past month or two, many Americans have bought foreclosed property under the belief that real estate has hit bottom and finally turned up. The Russell opinion – if the stock market is topping here, I believe that the real estate market will sink to new lows (and this time we’ll see the commercial real estate market collapse along with the housing market). If you’re thinking of buying a real estate bargain, wait a while.

(6) Unemployment – Up?
If the stock market turns down here, unemployment will rise again. This will drive the Obama administration up the wall and scare hell out of every Democrat. The odds of cutting the national deficit will then be zero.

(7) Oil – Weakening?
Gold is rising in the face of weakening oil. It would be dramatic and bullish if gold detached itself from oil and all other commodities.

(8) VIX – Forecasting a Storm?
I’ve been saying, “After the calm comes the storm.” We’ve had the calm with VIX sinking into the 15 area but very recently, the VIX has risen to the 21 area, and this may be the early start of a coming storm.

(9) Gold and Cash – The Place To Be?
The action of gold during this period is superb. I’ve asked my subscribers to be in gold and cash, and to await developments. That’s still my preferred position – cash and gold.

Final message – gold and cash, cash and gold. This is not the time to be “cute”.

*http://seekingalpha.com/article/202167-richard-russell-s-in-cash-and-gold-no-time-to-be-cute?source=email

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In further edited excerpts from the original article* Thorsten Polleit (www.mises.org) goes on to say:

The current upward dynamic of the debt-to-GDP ratio in the U.S. is economically unsustainable but something can be done to correct the situation. While we do not know how much debt relative to GDP an economy can shoulder the level of debt relative to income cannot rise without limit. This insight is important, given that there is strong reason to believe that the extraordinary rise in the debt-to-GDP ratio is a result of the government-controlled, fiat-money system in which the money supply is increased through bank lending.

The Correction Scenario
Let us assume, for the sake of argument, that the current debt-to-GDP ratio has exceeded its sustainable level. What are the chances that output could start expanding more strongly than debt, thereby lowering the ratio? This would be a rather favorable scenario, as the debt-to-GDP ratio would decline, while income and employment would increase. Unfortunately, however, it is a rather unlikely correction scenario.

Lenders can then be expected to demand higher interest rates and/or to stop extending loans as the outlook for the possibility of borrowers repaying their debt (in real terms) deteriorates. In other words, market forces start pressing for a change in the hitherto-observed path of the total-debt-to-GDP ratio.

If commercial banks make their debtors repay their loans, the money supply declines. A drop in the money supply, in turn, would represent deflation and the symptoms would be declining prices for goods and services of current production, and for existing assets such as, for instance, stocks and real estate.

Deflation would lead to credit losses as a growing number of borrowers would find their incomes greatly diminished and — most importantly — falling short of expectations. Many borrowers would default on their debt.

If credit-related losses exceed their equity base, banks go bankrupt. Savers and investors in bank debentures would have to accept losses, as banks could not meet their debt service. It doesn’t take much to see that such an outlook could trigger a “flight out of debt.”

Investors would try to dump their bonds, causing interest rates to go up. Borrowers in need of rolling over their debt would have to accept higher refinancing rates, which would leave a growing number of investment projects unprofitable. The mere expectation of rising credit costs would therefore make possible an anticorrection scenario.

The Anti-correction Scenario
In the anti-correction scenario, central banks — seeing an unraveling debt pyramid — would decide to prevent banks from defaulting on their debt by pushing short-term interest rates to record lows and providing additional base money for bank refinancing — by monetizing banks’ debentures and/or (troubled) assets.

Keeping a circulation-credit boom going requires ever-greater amounts of credit and money, provided at ever-lower interest rates. However, credit and money cannot be increased indefinitely by the central bank and commercial banks. In fact, it is money demand that would set a limit.

If inflation — that is, a rise in the money supply — does not exceed an unacceptable level, people may well continue to use money even if it loses its purchasing power. If, however, inflation exceeds an acceptable level, or if people start expecting inflation to continue to rise further, the money is doomed to fail.

As Ludwig von Mises noted in 1923, “once the people generally realize that the inflation will be continued on and on and that the value of the monetary unit will decline more and more, then the fate of the money is sealed. Only the belief, that the inflation will come to a stop, maintains the value of the notes.”

The private sector may be able to cope with deflation (and the ensuing redistribution of property rights). The institution of government, in its current size and scope, however, cannot. Inflation — the rise in the money supply — is an indispensable tool for financing government outlays for which the taxpayer would presumably not want to pay out of his current income.

Mises noted, “inflation becomes one of the most important psychological aids to an economic policy which tries to camouflage its effects. In this sense, it may be described as a tool of anti-democratic policy. By deceiving public opinion, it permits a system of government to continue which would have no hope of receiving the approval of the people if conditions were frankly explained to them”.

The effort to prevent government from defaulting on its debt is, therefore, the greatest danger for the value of money and this is why an unsustainable debt-expansion path poses such a great danger to the exchange value of money.

Central banking makes it possible for the government to expand the money supply by any amount, at any time deemed necessary and once (hyper)inflation is publicly seen as being the lesser evil of all options available for the government meeting its debt service, it cannot be dismissed out of hand that (hyper)inflation would be the consequence of an unsustainable debt-to-GDP ratio.

*http://mises.org/daily/3754

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The debate over deflation/inflation continues as some of our most astute economic observers take sides. Frankly, I think that both sides are missing part of the picture. The debate concentrates on the after shocks of inflation/deflation: prices instead of the money supply and the demand for it. Words: 621

In further edited excerpts from the original article* Paul Mladjenovic (mladjenovic.blogspot.com) goes on to say:

“Prices” are the visible barometer that both sides of the debate gauge. The inflationists see (or warn about) “rising prices”. The deflationists see (or warn about) “falling prices”. There are very convincing cases by both sides.

At the present time the deflationists seem to have the upper hand. They point out that we have a “deflationary economic environment” due a variety of factors that are contributing to falling prices (such as deleveraging and unemployment). Inflationists see the current stage being set for future rising prices due to factors such as expanding money supply and a weakening dollar. What is the real deal?

First, let’s set the record straight on the terms…

Inflation:
Is the condition where more money (such as a paper currency) is created by the issuing authority (the government’s central bank) and this growing supply of money is chasing a fixed basket of goods and services (and/or assets). Inflating the money supply (“monetary inflation”) is the problem and the symptom is usually rising prices (“price inflation”). Inflation is not the price of things going up…it is the price (or value) of money going down.

Deflation:
Generally the opposite… The money supply is stable or shrinking relative to the supply of stuff we
buy and subsequently there is less money chasing goods and services. In this case, the “value” of money usually increases.

Therefore, for prices to rise there needs to be more (and growing) money supplied to the market relative to what is being bought. Two things need to happen for prices to rise from an inflationary perspective:

1. More money needs to be created.
This money needs to “chase” what is being purchased (Think “circulation” or “velocity”). This is a crucial point. Prices won’t go up just because the money supply expands; the money has to be actively “chasing” those goods or services (or assets) for the prices to see upward movement.

2. For prices to go up (“price inflation”), you need monetary inflation (increasing the money supply) and velocity (the money is chasing goods, services and/or assets).

In recent years, the money supply has indeed expanded dramatically…but…relatively little “chasing” has been going on. If the Federal Reserve instantly created $10 trillion dollars and gave it to you, that is definitely monetary inflation but… if you merely put it in your sock drawer and hoard it, then it would not circulate (chase stuff) and therefore you wouldn’t see “price inflation”.

This is where part of the confusion and controversy is. Inflationists point out that money supply is growing dramatically and they are correct. Deflationists point to falling prices in many areas of the economy and they are also correct. Here is what we should be aware of…

The prices of goods, services and assets are most affected by 2 fundamental factors:
1. The money supply (primarily enacted by government)
2. Demand and supply (primarily enacted by the marketplace)

Understanding the money supply (its growth or shrinkage) coupled with understanding “demand and supply” will give you a better picture of the economy. This, in turn, will make you a better analyst, money manager or investor.

Regardless of what side of the debate is proven correct the bottom line is that precious metals should be considered in a balanced, diversified wealth-building strategy. Paper currencies can be produced at will but precious metals can not. Therefore, any investor or money manager interested in diversification and safety should consider precious metals.

*http://mladjenovic.blogspot.com/2009/10/part-i-deflation-or-inflation-here-is.html

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In further edited excerpts from the original article* Graham Summers (www.gainspainscapital.com) goes on to say:

Let’s take US GDP Growth numbers, for instance. The most common manipulations used to overstate this number are:

1. Understating Inflation
The Fed’s CPI (measure of inflation) is a joke. For those who are new to this little game, first off you need to know that the Government has altered its measure of inflation several times in the last 100 years.

The original measure was to simply keep track of how much it costs to buy a particular basket of goods (say meat, milk, eggs, gasoline, etc). However, the problem with using this measure was that it quickly demonstrated that the cost of living had gone up in the US dramatically as a result of US Dollar devaluation.

Indeed, if you’re trying to pump an economy higher on credit to cover up the fact that incomes have fallen 40% or so in 30 years (while simultaneously forcing consumers into financial speculation in order to maintain the illusion of wealth), the last thing you want is for Joe America to realize “hey, wait a minute, back in the ‘60s or early ‘70s only one parent worked and people were able to get by… why are both parents now working and still in debt up to their eyeballs?”

Consequently, the Feds changed their inflation measure to remove the costs of food and energy (after all, how many consumers actually need to buy items from those sectors?). The beauty of this is that it not only hides the fact that a gallon of milk now costs $4 or so vs. $1.15 in 1970 (and milk is definitely not three times as awesome now as then) but it also allows GDP to appear larger.

In order to illustrate this last point, think of a company that produces staples. Let’s say that in 1970 this company produced $1 million worth of staples. Today, this company produces $5 million in staples. So the company has grown five times larger right? Not so if inflation has risen five fold over the same time period. Instead, all you’ve done is shrink the value of the currency in which sales are denominated (in this case Dollars). Put another way, your company has not grown, it’s just that the currency it sells staples in has lost a huge amount of value. However, if you claimed that inflation only rose three times as high (rather than five) then your company appears to have grown a lot more. In simple terms, by changing the measure used to account for inflation, the Feds are able to make GDP growth appear larger than it really is.

2. Overstating production of various segments of the economy
Overstating various economic segments such as US exports of goods and services in spite of the fact that US production facilities are only currently operating at roughly 69% (meaning nearly one full third of industrial production facilities are sitting there doing nothing).

3. “After the fact” revisions lower
A final GDP gimmick is to post a higher growth number that is then revised much lower in the future.

Let’s imagine you had a friend who liked to tell you outlandish stories which he then downplayed time and time again until they were plain, ordinary tales. How many times would you fall for this trick? Surely after three or four you’d figure out that this particular friend rarely tells you factually based anecdotes. Amazingly, when it comes to GDP numbers, traders don’t seem to bother.

The above examples only pertain to GDP growth. Virtually every economic metric published these days (whether it’s retail numbers, housing numbers, unemployment claims, inflation, etc) has similarly glaring defects/ issues that cover up just how bad things have gotten in the US.

Indeed, the worse the US economy has gotten, the poorer the economic accounting has become. Consider the following:

1. The US was only officially declared to be in a recession on December 1, 2008: right after the entire financial system nearly imploded. At that time, the recession was claimed to have begun in December 2007 (so it took a full year before the Feds announced the obvious).

2. The recession was declared “over” by Ben Bernanke and pals in August 2009: a time when one in US eight mortgages were in arrears or foreclosure and one in eight US citizens were un/underemployed or on food stamps.

3. The US stock markets are thought to be in a new bull market despite posting a 24% loss over the last decade.

4. The Financial Crisis is largely thought to be over (or at least the worst is over) despite the fact that none of the real issues plaguing the system have been fixed (not to mention the ongoing problems in the derivatives, commercial real estate, and debt markets).

Economic/Political Nonsense is Just Beginning
With mid-term elections coming up later this year, I believe we are at the beginning of a real bull market in economic/ political nonsense. The massaged data, nonsensical proclamations, and other shenanigans we’ve seen over the last decade are JUST the beginning. After all, no one is going to run on a “we’re in a Depression, not just a Recession, and we’ve spent several trillions of dollars without fixing anything just so Wall Street can get record bonuses again” platform.

Instead, we’re going to see economic data become even more divorced from reality, assertions that the economy is back on track, and that at worst there is the specter of a “double-dip” recession looming. Heck, even these fears are sugar-coated… literally (making an economic nightmare sound like an ice-cream sundae is a genius marketing move).

Conclusion
I believe that the worse things get, the better they will sound coming from our nation’s leaders/pundits.

*http://seekingalpha.com/article/180780-the-coming-bull-market-in-economic-nonsense (For those who are interested www.GainsPainsCapital.com provides a free daily newsletter dedicated to providing daily insights to the stock, commodity, currency, and bond markets and telling investors the REAL story behind the moves in the financial markets.)

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In further edited excerpts the original article* Sean Brodrick (www.uncommonwisdom.com) goes on to say:

4 economic dark clouds are gathering over the country:

1. Jobs Depression
Sure, sure, GDP is rising … on a tide of government spending. U.S. manufacturing is growing too, as long as you don’t mind that a growing slice of the parts used in “U.S.” manufacturing are made in China. Meanwhile, jobs are vanishing. Twenty-nine million Americans either can’t find jobs or can’t find full-time work. Do you think that’s going to improve as long as companies can ship American jobs overseas where someone will work for $3 a day? Heck, no. It’s going to get worse!

2. Budget Implosion
Yes, the national debt of the U.S. has doubled in less than eight years, but I’m sick of talking about the ballooning U.S. budget gap. For a different dose of awful, let’s talk about the states. Across America, states are running deep in the red, and together, face a shortfall of $156 billion in fiscal 2010, according to The Economic Policy Institute.

Florida, Arizona, Michigan, New Jersey, Pennsylvania and New York are all facing severe funding crises, and they’re just the tip of the iceberg. The head of JPMorgan Chase, Jamie Diamond, says California’s $20 billion budget deficit is worse than anything facing Greece or other financially troubled countries in Europe. Since California is the world’s eighth-largest economy, that should set off alarm bells!

State budget deficits will likely be resolved with layoffs and budget cuts, which will hammer local economies and worsen the downward spiral.

3. Energy Crisis
After over 18 months of recession, world oil consumption is roaring back to its pre-crash peak. The International Energy Agency says oil demand will probably hit 86.5 million barrels a day this year. That is equal to a thousand barrels a second. The growth in demand isn’t in the U.S. — we’re using oil at 2005 levels. Instead, it’s the growth in China, India and other emerging markets that is driving global demand now.

Meanwhile, on the supply side, new oil discoveries peaked decades ago. Starting in 2011, we’ll see a drop of just over 4 million barrels per day from the fields that are currently producing about 85 million barrels a day. After 2014, world production will go into steeper and steeper decline.

4. The Road to Famine
World food demand is projected to increase 100% by 2050 due to a rapidly expanding population in countries such as China and India and yet, 963 million people, 14% of the world’s population, are already chronically hungry. Do you think you’re immune? The food on your dinner table travels an average 1,500 miles to get to your plate. Think again!

Stand Up and Fight Back
I could go on, but a whole list of all the problems facing us can seem overwhelming, and it’s probably too early for you to start drinking. I don’t think these problems will hit next week, but they are growing, and time is a luxury we cannot afford to waste. Here’s the good news: you don’t have to sit there like a lump and wait for bad news to smack you in the face. You can stand up and fight back!

What am I doing? It all boils down to the Three P’s — Plan, Prepare and be Proactive. In other words, I’m trying to take an honest assessment of the problems facing the country and me personally. I’m preparing both physically (storing food, water and more) and financially. I’m also trying to be proactive — spending a little now to save a lot of potential pain down the road.

I cover many of the basics of what “prepping,” as it’s called, in my new book, The Ultimate Suburban Survivalist Guide and, when it comes to finances, you should be using these good times to get ready – and if you don’t think these are the good times, brother, you don’t want to know about the potential bad times!

Below are 4 ideas to beat these crises and protect your portfolio:

1. Move Your Money
Do you trust the big banks? I sure don’t. I think they’re so crooked they have to screw on their pants in the morning. The bailouts they’ve received by their bought-and-paid-for pals in Washington should be criminal. The bad behavior was never punished, which increases the odds that the big banks are going to mess up big-time again. Do you think that Wall Street banks will get another bailout? I think that’s unlikely — the American people are downright furious! So I don’t want my money in their banks when the manure hits the fan AGAIN.

I’m happy to say that my family has joined the “Move Your Money” campaign. We’ve moved our money from a large, global bank to a couple of smaller, local credit unions and community banks. Community banks are typically more conservative about how they manage their money. I certainly don’t have to worry about them using my taxpayer dollars to hand out billion-dollar bonuses.

I checked on Bankrate.com to find out which banks in my area are the most financially secure — a precaution I recommend for anyone thinking of making the same move. And you can google “Move Your Money” for more information on this movement. It’s not just individuals who are doing this. Cities as big as New York and Los Angeles are fed up and considering moving their money to local community banks as well.

2. Buy Gold While It’s Still Cheap
We’re all used to gold going down when the dollar goes up but a funny thing happened in February — gold and the dollar started going up at the same time and this new trend is continuing which is because both gold and the dollar are seen as safe havens by Europeans who are worried about their currency, the euro. We saw the same thing in 2005 … when Europeans were worried about the euro.

The dollar’s rally ended in 2006, when it slumped again. As for gold back in 2006, it continued to accelerate higher, helped along by a falling dollar. You see, when the dollar was rising, it kept a leash on gold’s gains. When the dollar started to slump, gold was able to bolt ahead – so, if you think gold is pricey now … just you wait!

I prefer to own physical gold for the long term, but you can always buy the SPDR Gold Trust (GLD) or ETFS Gold Trust (SGOL) if you’re just doing it for a trade.

3. Buy Gold Miners While They’re Still Cheap
You can play the coming rally with any gold ETF, but I think gold miners look cheaper right now. If you don’t like buying individual miners, consider the Market Vectors Gold Miners ETF (GDX) or one of the other funds or ETFs that holds a basket of miners.

Now, why buy gold miners if I think hard times are coming?
a) If the U.S. dollar slumps the way I think it will, stocks will probably head higher. That’s because they’re priced in dollars, so it takes more dollars to buy them.
b) In the Great Depression, when many stocks weren’t worth toilet paper, select gold miners did well. That’s because the price of gold did well, and they were real companies producing a real asset.

4. Ride The Market Megatrends
Not all things financial are headed down the tubes. The commodity supercycle is real and we’re seeing it play out as China, India and other emerging markets buy more and more metals, energy, and other commodities to feed their economic expansions. Commodities should continue to outperform going forward. While other sectors are headed down the tubes, commodities should continue to outperform going forward.

Meanwhile, America’s baby boomers are aging. They’re going to be looking for income, and with bonds paying piddly yields, they’ll probably load up on dividend-paying stocks and what are some stocks that pay some of the best dividends? Commodity stocks!

Put those two trends together and you should have some stocks that will outperform the market, pay you nice dividends and potentially rack up solid price appreciation, too.

You can find these stocks on your own. If you’re looking for dividends, as a rule of thumb, you want stocks that pay at least a 3% dividend. Just be careful, and be aware that when it comes to stocks that pay dividends, it can be hard to tell the turkeys from the eagles.

*http://www.uncommonwisdomdaily.com/4-tips-to-beat-the-next-crisis-8846 (Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. To view archives or subscribe, visit our site.)

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