The future of the United States of America is being systematically destroyed by our politicians, but unfortunately most Americans don’t really grasp exactly what is happening.  Read more…

The global debt crisis has reached a dangerous new phase.  Unfortunately, most Americans are not taking notice of it yet because most of the action is taking place overseas, and because U.S. financial markets are riding high.  But just because the global economic crisis is unfolding Read more…

In the financial world, the month of October is synonymous with stock market crashes.  So will a massive stock market crash happen this year?  You never know. The truth is that our financial system is even more vulnerable than it was back in 2008, and financial experts such Read more…

Michael Snyder: There are more Americans dependent on the federal government than ever before in U.S. history.  According to the Survey of Income and Program Participation conducted by the U.S. Census, well over 100 million Americans are enrolled in at least one welfare Read more…

After 6 straight weeks of losses, it looks like the US stock market is ready for a winning week. The Dow rose 123 points. Oil stayed below $100. But the yield on the 10-year T-note rose above 300 basis points.

And here’s the latest from The Financial Times:

“S&P cuts Greece’s rating one step closer to default.”

Want to earn a nice yield on your money? Buy a Greek 10-year bond. It will pay you 17% interest. For a while.

But wait. You say you can’t trust the Greeks? You say they’re not good for the money?

“The Greek political landscape is ingrained with vested interests, endemic kleptocracy and bribery,” writes John Sfakianakis, chief economist of Banque Saudi Fransi.

Unemployment is around 20%. People dodge taxes. Government workers don’t show up for work. Households spend too much. And the government is going into debt so deeply and so rapidly it can’t possibly get out.

Hey… It’s just like the US! No, the US is worse, says Bill Gross. CNBC:

When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries, Pimco’s Bill Gross told CNBC Monday. Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at “nearly $100 trillion,” that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.

“To think that we can reduce that within the space of a year or two is not a realistic assumption,” Gross said in a live interview. “That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly.”

How do you like that? He didn’t even mention the fact that Americans can’t sell their houses to Germans or turn their country into a retirement home for sun-deprived Scandinavians.

But wait, if the US debt situation is as bad or worse than Greece’s, how come the yield on US 10-year notes isn’t 17% too?

Therein may lay an even bigger opportunity. What if Mr. Market were making a mistake?

Everybody knows that Greece always defaults on its debt. It’s been in default, one way or another, for about half of its life – ever since it gained independence in 1828.

But the USA? If you can’t trust the US to pay up, who can you trust?

So, investors may feel secure lending money to the US…even though the fundamentals are little different from those of Greece. They may think: “the US never defaults.”

And yet, if there’s one thing we can learn from financial history it is that nobody is immune from financial errors. Everyone gets greedy and stupid from time to time. And no paper currency lives forever.

Right now, you can earn 17% on Greek debt or 3% or US debt. We’ll make a prediction that you can take to the bank: that spread will narrow.

The inflation rate in America is a matter of debate. But even the US government’s own number crunchers put it at about 5% for the first quarter of this year. That makes the real return on US 10-year notes a MINUS 2%.

How long will investors content themselves with a negative return? Maybe for a while. But not forever. They usually want a real return of about 3%, with no threat of default. A safe return, in other words.

And when they realize that the inflation rate in the US is really 5%…and that the return on US debt is NOT safe…they’re going to want a higher interest yield.

Say 5%. Or 7%. Or 10%.

Then, all hell is going to break loose.

Bill Bonner
for The Daily Reckoning

The Likelihood of a US Default originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
The Likelihood of a US Default

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Continued from Part One.

According to a June 8th CNN/Opinion Research Corporation poll, 48 percent of Americans believe that another Great Depression is likely to occur in the next year – the highest that figure has ever reached. The survey also indicates that just under half of the respondents live in a household where someone has lost a job or is worried that unemployment may hit them in the near future.

Suddenly, after years of obvious economic hardship experienced by tens of millions of Americans – only when the suffering and pain can no longer be cloaked in abstractions and cooked statistics – does an emboldened media dare utter the forbidden “D” word.

For Trends Journal readers, alerted to this emerging trend some three years ago, the prospect of Depression should come as no surprise. Neither should the idea that, when it hits and can no longer be denied, a long suffering public will take to the streets.

When I made this forecast back then it was written off by most of the major broadcast and print media. Now, however, when one of their own, belatedly and hesitantly, raises that possibility he is elevated to sage status and it becomes big news. In early June, Democratic strategist James “It’s the Economy, Stupid” Carville, having finally mastered the higher math of adding two plus two, warned that decaying economic conditions heightened the risk of civil unrest.

As I described it all those years ago: “When people lose everything, and have nothing left to lose, they lose it.”

Trend Forecast: The wars will proliferate and civil unrest will intensify. As we forecast, the youth-inspired revolts that first erupted in North Africa and the Middle East are now breaking out in Europe. Given the trends in play and the people in power, economic collapse at some level is inevitable. Governments and central banks will be unrelenting in their determination to wring every last dollar, pound or euro from the people through taxes while confiscating public assets (a.k.a. privatization) in order to cover bad bets made by banks and financiers.

When the people have been bled dry financially and have nothing left to give, blood will flow on the streets.

Trend Lesson: Learn from history. Do you remember when it first became apparent that the US economy was in deep trouble and heading toward the “Panic of 08”? Not many will. Most people were in a summer state of mind and in holiday mode. It was late July 2007 when the stock market suddenly plunged from its euphoric 14,000 high.

Though we had warned in our Summer 2007 Trends Journal (released that June) that “trends indicators point to a major crisis hitting the financial markets between July and November,” the diving Dow was downplayed as a mere “hiccup” … a time to pause between more mouthfuls of expansion.

Biggest mistake in a falling stock market

The huge swings in the Dow are giving investors pause. But taking your money out of the market now could be the gravest mistake of all.

NEW YORK — This past Thursday was the second worst day of the year for the Dow Jones Industrial Average. But remember, it was just a week ago today that the Dow closed above 14,000 for the first (and only) time.
Fluctuations in the market shouldn’t get to the 401(k) investor. Keep in mind your time horizon – most of us are going to be invested in the market until we retire, often decades from now. CNN 27 July 2007

Four years and trillions of dollars in stock and 401(k) losses later, that typical “take a deep breath, stay the course” advice looks tragically misguided. The Dow would eventually lose more than half its value and now, in June 2011, it’s fallen below 12,000.

The moral of this story is to not let your mind take a summer vacation. Conditions are rapidly deteriorating and it is imperative to remain on high alert. Another violent financial episode is looming. It may be triggered by economics (e.g., debt defaults and debt crisis contagion in Europe, a crashing US dollar, or commodity price spikes); it could be terror (false flag or real), a man-made disaster (another Fukushima) or one made by Mother Nature … or any combination of the above.

Publisher’s Note: To excel in any field – from gourmet chef to concert pianist to close-combat warrior – you have to practice … endlessly, over and over, until finally the training sinks in and becomes a part of you.

In that spirit, I again repeat: preparing for financial survival is a “practice.” And it has to be treated as if you are preparing for battle; expect the unexpected and prepare for the worst, which in these perilous times could be a declaration of economic martial law. Banks may close, currencies may be devalued and deposit withdrawals may be imposed. Remember Gerald Celente’s basic survival strategy, “GC’s Three G’s: Guns, Gold and a Getaway plan.”

Regards,

Gerald Celente
for The Daily Reckoning

P.S. In the Summer 2011 Trends Journal (mid-July release) we will provide practical strategies to cope with the coming collapse and offer approaches that, if implemented, could reverse the prevailing negative trends.

Collapse: It’s Coming! Are You Ready? (Part Two of Two) originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Collapse: It’s Coming! Are You Ready? (Part Two of Two)

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

The Dow Jones Industrial Average tumbled 172 points last Friday – punctuating another thoroughly forgettable week for American capitalism. Friday’s loss submerged the Dow back below the 12,000 mark, while also producing a sixth straight losing week for the US stock market.

How rare is a six-week losing streak?

During the last twelve years, the US stock market has suffered only five losing streaks of six weeks or more – the last of which occurred in the summer of 2004. In three of those five rare losing streaks, gold and commodities also fell. In the first two such instances – September-October of 2000 and February-March of 2001 – the S&P 500 Index fell 20% or more over the ensuing year…and was still showing losses three years later.

The third of these three instances is underway at the very moment…and that’s probably not good news.

Most of the time, when stocks go zig, gold (and commodities) go zag. That’s called “inverse correlation” or “non-correlation.”…and it is one of the many reasons gold is a nice thing to own. You can usually count on it to shine when almost every other investible asset is losing its luster.

Lately, however, gold is doing very little zagging to the upside, even though stocks are zigging to the downside. In fact, there isn’t a lot of non-correlation going on anywhere in the financial markets. Many assets are correlating with stocks much more than usual. When all asset classes begin falling together, even worse declines are usually on the way. Professional investors call this a “liquidation event.”

The recent min-selloff on Wall Street hardly qualifies as a liquidation event…yet. But one thing is very clear: during the last few weeks it has been much easier to lose money than to make it…no matter what you owned.

During the last six weeks, the S&P 500 has dropped nearly 7%. During that same timeframe, gold is down 2%, oil is down 13% and silver is down 25%. Even Inflation-protected Treasury bonds [TIPs] are down. In short, there have been very few places to hide for the last month and a half.

This simultaneous selloff in stocks and commodities is not comforting. But lest we be accused of “data snooping,” allow us to advance a theory to validate the apparent connection between the six-week losing streaks of the past and the present.

The theory is pretty basic: when everything starts falling at the same time, a liquidation event is underway. Investors simply want out…of everything. In such circumstances, risk avoidance takes the place of risk-taking…and this attitude tends to persist for a while, as the examples of 2000 and 2001 illustrate.

A liquidation event may or may not be underway, but investors do not lack for solid reasons to head to higher ground…or to any ground that doesn’t act like quicksand. Past is not necessarily prologue, dear reader. But when investors become eager sellers of all assets, caution is in order.

It’s time to do one of the following things:

1) Panic and reduce your exposure to equities, just in case.
2) Think long-term and don’t worry about it.
3) Buy the stuff that holds its value long-term, no matter what the short-term noise might be.
4) Both #1 and #3.

Our vote would be #4.

Eric Fry
for The Daily Reckoning

What to Do In Case of Liquidation originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
What to Do In Case of Liquidation

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

My friend Brad Farquhar is the co-founder of Assiniboia Capital in Saskatchewan, which invests in farmland there, among other things. He sends the following note:

“Farm Credit Canada, the biggest ag lender in Canada, publishes a province-by-province report on movements in farmland prices in Canada every six months.

“Of course, we track this and are interested in what they have to say. No great surprises in their new data, but we also played around with it to see what else might pop out at us.

“Sometimes in my presentations I show a chart that demonstrates the correlation (within a range) of the price of gold, oil and farmland in Saskatchewan. The correlation is pretty good. Farmland tends to lag a bit because it is a less-liquid asset class and not quoted daily. Also, one acre of farmland is not necessarily substitutable for the next acre the way ounces of gold and barrels of oil are.

“But as the next chart shows, the Sask farmland/gold ratio is getting well outside its traditional range.

“These things tend to correct themselves, and would do so either by the price of gold coming down or the price of farmland going up. Given the various forces at work in the financial world, I don’t see the price of gold coming down. Which leaves farmland to go up (particularly here in Saskatchewan, where it is still undervalued relative to its productivity).

“With gold held at $1,500, the price of Sask farmland would need to move to $865 per acre just to get back within the normal historical range. The current price is $526 per acre, representing upside of 65%. Of course, we expect gold to move higher too, dragging all other real assets along with it.”

Brad’s firm has been in Saskatchewan farmland since 2005. It’s turned out to be a good call. I have written about Saskatchewan farmland many times in the past…and I have been a longtime advocate of buying farmland. That’s why I’m planning to visit Brad in Regina next month and have a look around. I’ll have more to share with you on all of this soon, as well as ways you can participate.

There are many opportunities in Saskatchewan, which is an agricultural powerhouse. Saskatchewan exports a large percentage of the world’s goods:

• 67% of world’s lentil
• 56% of world’s peas
• 25% of world’s mustard
• 40% of world’s flaxseed
• 18% of world’s canola
• 33% of world’s durum
• 53% of world’s potash

I remain a big believer in agriculture-focused investments as one of the very best “hard asset” allocations for the decade ahead. Ag investments not only provide a hedge against dollar weakness, they also stand to benefit from extremely favorable supply-demand trends worldwide.

The world needs more food. It won’t be easy to supply it. That’s the kind of trend all investors should crave.

While it’s true that you can’t transport an acre of farmland or spend it as easily as a Krugerrand, neither can you grow lentils on a gold bar. If you have a hard time choosing between the two, buy both.

Regards,

Chris Mayer
for The Daily Reckoning

Buy Gold…or Farmland originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Buy Gold…or Farmland

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

This stock's story started in 1972 with a nagging stomachache.

To ward off chronic discomfort, a Utah school teacher put a spoonful of cayenne pepper into an easy-to-swallow gelatin capsule. He felt immediate relief, but perhaps more importantly realized his remedy also had business potential. Shortly after, Nature's Sunshine (Nasdaq: NATR) was born.

The first company to encapsulate herbs and sell them as natural remedies, Nature's Sunshine nutritional, herbal, weight management and personal care products are now sold in more than 40 countries worldwide through a network of more than 600,000 independent distributors.

The company appears poised to grow further. According to the National Center for Health Statistics (NCHS), dietary supplement use has widely increased in the past two decades. Between 1988 and 1994, 42% of all Americans used supplements. In 2003 to 2006 this increased to 53%. A recent survey by Wakefield Research found that more that 60% of adults in the United States currently take vitamins or supplements.

Not surprisingly, in 2010, the vitamins and minerals market was valued at $24 billion, worldwide. By 2015, the market is expected to be worth nearly $30 billion. And with baby boomers aging, this number is only expected to keep rising.

From the viewpoint of technical analysis, it hasn't always been sunshine and rainbows for this health-oriented company.

In 2006, when Nature's Sunshine went public, shares quickly ran up from around $8 to $12. By July 2007, they climbed to a peak of $14.45. But they were caught in the downdraft of a plummeting market and plummeted to a low of $3 by June 2009.

Shares have crept back up over time, however, slowly rising from around $5 to $9 to $14 by mid-2010.

Unable to break the $14.75 mark in May 2010, the stock pulled back to near the $8 level in June 2010 and consolidated there for nearly a year, until May 2011.

The stock is now just emerging from what looks to be a multi-month basing pattern. This basing pattern appears as a long “U,” marked by support near $8 and resistance on either side of the pattern, at about $14.75.

Shares have hit an all-time high of $14.95 after bullishly breaking $14.75 resistance during the June 6 trading week. With no historical resistance in sight, the stock could move much higher.

According to the measuring principle for a basing pattern, calculated by adding the height of the pattern to the breakout level, the stock could reach a price target of around $21.50 ($14.75 – $8 = $6.75; $6.75 + $14.75 = $21.50). At current levels, this price target represents a 44% gain.

The herbal-wellness company also looks fundamentally strong.

In early May, the company reported solid first-quarter results. Due to growth in existing markets and expansion into emerging markets, revenue for the period increased 7% to $92.8 million, from $86.8 million in the year-ago period.

For the full 2011 year, analysts project revenue will increase about 4.8% to $366.7 million, from $349.9 million last year. By 2012, analysts project international growth will drive revenue up a further 5%.

The earnings outlook is equally strong.

Due to decreased general administrative and operating costs, first-quarter earnings rose 38.7% to $0.43 per share, from $0.31 in the year-ago quarter. For full-year 2011, analysts expect earnings to more than double to $1.15, from $0.54 the prior year. By 2012, earnings are projected to increase an additional 4.4%, to $1.20.

The stock is also attractively valued, based on its forward price-to-earnings (P/E) ratio of 12.5 and its price-to-sales (P/S) ratio of 0.7. In comparison, competing nutritional products company Herbalife (NYSE: HLF) has a forward P/E of about 15.5 and a P/S ratio more than double Nature's Sunshine's, at around 2.2.

Furthermore, Nature's Sunshine has a strong balance sheet, with $61.2 million in cash and no long-term debt. This liquidity gives the company the financial wherewithal to continue developing its product line.

Action to take –> Having just bullishly broken out of a basing pattern, I believe the stock presents a limited-time trading opportunity, with the potential to make as much as 44% for traders.

Lots of pessimism since QE2 is deemed a failure and no QE3 is coming.   Here’s one article that reminds us to ensure we are risk aware and maintain an intelligently adusting protection strategy.     Posted at Seeking Alpha by Michael T. Synder   http://seekingalpha.com/article/274478-the-next-crash-could-be-a-lot-worse

The Next Crash Could Be Alot Worse

here’s a lot of emotion in this market at the moment, and the conversations among traders are nearly all leaning toward the bear side

So what are some of the signs that this downturn on Wall Street may turn into a full-blown crash?

Well, according to the Wall Street Journal, junk bonds are being sold off at an alarming rate right now. Does the following quote from the Journal remind anyone of 2008 at least a little bit?….

A steep decline in prices of bonds backed by subprime mortgages has spread through the riskiest segments of the credit markets, ending rallies in high-yield corporate bonds and commercial real-estate debt.

Also, many of the big Wall Street banks are already laying off workers. In a previous article I wrote about the potential for Wall Street to go into “panic mode“, I noted that Goldman Sachs (GS), Bank of America (BAC), JPMorgan Chase (JPM) and Morgan Stanley (MS) are all laying people off or are considering staff cuts.

The truth is that the big banks on Wall Street are not nearly as stable as most people think that they are. Moody’s recently warned that it may downgrade the debt ratings of Bank of America, Citigroup and Wells Fargo.

Another major story on Wall Street right now is oil. OPEC recently announced that oil production levels will not be raised, even though the price of oil has been hovering around $100 a barrel.

World oil supplies are very tight right now. In fact, the globe actually consumed 5 million barrels per day more oil than it produced during 2010. This was possible because the difference was apparently made up by drawing down reserves.

But if oil supplies are this tight already, what is going to happen if a major war (as opposed to all of the minor wars that are already happening) erupts in the Middle East?

The world is sitting on the edge of a financial disaster.

It is important to keep in mind that Europe is also in far worse financial condition than it was just prior to the financial collapse of 2008.

It is being reported that German finance minister Wolfgang Schaeuble is convinced that a “full-blown” financial meltdown by Greece is a very real possibility. The cost of insuring Greek debt has soared to a brand new record high, and officials all over Europe are in panic mode.

But financial problems are not just happening in Greece. The largest bank in France has just cut in half the amount of cash that customers can withdraw from ATMs each week.

Most Americans don’t spend much time thinking about the financial condition of Europe, but the truth is that what happens in Europe is going to play a major role in the months and years ahead.

Of course most Americans already know that the U.S. government is a financial mess.

As the “debt ceiling deadline” of August 2nd draws closer, the U.S. government has been raiding retirement funds in order to stay under the debt limit.

Many investors are quite nervous about what may happen if the U.S. government actually does start defaulting on debt on August 2nd.

Others claim that the U.S. government is already in default.

The only Chinese agency that gives credit ratings on sovereign debt says that the U.S. government “has already been defaulting” and the Chinese government has been repeatedly warning that the U.S. needs to get its finances in order.

In any event, this debt ceiling drama will get resolved one way or another.

The bigger question is this….

How is the U.S. government going to respond when the next financial crash happens?

Back in 2008, the Federal Reserve and the U.S. government took unprecedented steps to prop up Wall Street.

But can they really do that again if we see another major crash in 2011 or 2012?

Many believe that things will be totally different this time around. Just check out what Jim Rogers recently told CNBC….

“The debts that are in this country are skyrocketing,” he said. “In the last three years the government has spent staggering amounts of money and the Federal Reserve is taking on staggering amounts of debt.

“When the problems arise next time…what are they going to do? They can’t quadruple the debt again. They cannot print that much more money. It’s gonna be worse the next time around.”

Jim Rogers is right about that.

The next time we see a collapse on the scale of 2008 it is going to be a much bigger mess.

Global financial markets are extremely vulnerable right now and there are a whole host of potential “tipping points” which could push them over the edge.

The Federal Reserve and the U.S. government more or less used up all of their ammunition on the 2008 crisis.

If we see another collapse in 2011 or 2012 there is not going to be much of a safety net available.

The entire world financial system is simply swamped with way too much debt. The world has never seen anything even remotely close to the gigantic mountains of debt that have been accumulated around the world today.

The current global financial system is not sustainable. More crashes are inevitable. A lot of people are going to get steamrolled.

Hopefully you will not be one of them

Read more here:
The Next Crash Could Be Alot Worse

HERE IS YOUR FOOTER

Lots of pessimism since QE2 is deemed a failure and no QE3 is coming.   Here’s one article that reminds us to ensure we are risk aware and maintain an intelligently adusting protection strategy.     Posted at Seeking Alpha by Michael T. Synder   http://seekingalpha.com/article/274478-the-next-crash-could-be-a-lot-worse

The Next Crash Could Be Alot Worse

here’s a lot of emotion in this market at the moment, and the conversations among traders are nearly all leaning toward the bear side

So what are some of the signs that this downturn on Wall Street may turn into a full-blown crash?

Well, according to the Wall Street Journal, junk bonds are being sold off at an alarming rate right now. Does the following quote from the Journal remind anyone of 2008 at least a little bit?….

A steep decline in prices of bonds backed by subprime mortgages has spread through the riskiest segments of the credit markets, ending rallies in high-yield corporate bonds and commercial real-estate debt.

Also, many of the big Wall Street banks are already laying off workers. In a previous article I wrote about the potential for Wall Street to go into “panic mode“, I noted that Goldman Sachs (GS), Bank of America (BAC), JPMorgan Chase (JPM) and Morgan Stanley (MS) are all laying people off or are considering staff cuts.

The truth is that the big banks on Wall Street are not nearly as stable as most people think that they are. Moody’s recently warned that it may downgrade the debt ratings of Bank of America, Citigroup and Wells Fargo.

Another major story on Wall Street right now is oil. OPEC recently announced that oil production levels will not be raised, even though the price of oil has been hovering around $100 a barrel.

World oil supplies are very tight right now. In fact, the globe actually consumed 5 million barrels per day more oil than it produced during 2010. This was possible because the difference was apparently made up by drawing down reserves.

But if oil supplies are this tight already, what is going to happen if a major war (as opposed to all of the minor wars that are already happening) erupts in the Middle East?

The world is sitting on the edge of a financial disaster.

It is important to keep in mind that Europe is also in far worse financial condition than it was just prior to the financial collapse of 2008.

It is being reported that German finance minister Wolfgang Schaeuble is convinced that a “full-blown” financial meltdown by Greece is a very real possibility. The cost of insuring Greek debt has soared to a brand new record high, and officials all over Europe are in panic mode.

But financial problems are not just happening in Greece. The largest bank in France has just cut in half the amount of cash that customers can withdraw from ATMs each week.

Most Americans don’t spend much time thinking about the financial condition of Europe, but the truth is that what happens in Europe is going to play a major role in the months and years ahead.

Of course most Americans already know that the U.S. government is a financial mess.

As the “debt ceiling deadline” of August 2nd draws closer, the U.S. government has been raiding retirement funds in order to stay under the debt limit.

Many investors are quite nervous about what may happen if the U.S. government actually does start defaulting on debt on August 2nd.

Others claim that the U.S. government is already in default.

The only Chinese agency that gives credit ratings on sovereign debt says that the U.S. government “has already been defaulting” and the Chinese government has been repeatedly warning that the U.S. needs to get its finances in order.

In any event, this debt ceiling drama will get resolved one way or another.

The bigger question is this….

How is the U.S. government going to respond when the next financial crash happens?

Back in 2008, the Federal Reserve and the U.S. government took unprecedented steps to prop up Wall Street.

But can they really do that again if we see another major crash in 2011 or 2012?

Many believe that things will be totally different this time around. Just check out what Jim Rogers recently told CNBC….

“The debts that are in this country are skyrocketing,” he said. “In the last three years the government has spent staggering amounts of money and the Federal Reserve is taking on staggering amounts of debt.

“When the problems arise next time…what are they going to do? They can’t quadruple the debt again. They cannot print that much more money. It’s gonna be worse the next time around.”

Jim Rogers is right about that.

The next time we see a collapse on the scale of 2008 it is going to be a much bigger mess.

Global financial markets are extremely vulnerable right now and there are a whole host of potential “tipping points” which could push them over the edge.

The Federal Reserve and the U.S. government more or less used up all of their ammunition on the 2008 crisis.

If we see another collapse in 2011 or 2012 there is not going to be much of a safety net available.

The entire world financial system is simply swamped with way too much debt. The world has never seen anything even remotely close to the gigantic mountains of debt that have been accumulated around the world today.

The current global financial system is not sustainable. More crashes are inevitable. A lot of people are going to get steamrolled.

Hopefully you will not be one of them

Read more here:
The Next Crash Could Be Alot Worse

HERE IS YOUR FOOTER

A seminal speech was delivered a few weeks ago by President Obama at the State Department, in it he outlined a radical switch of policy in the Middle East.  Such an error in judgement was made once before when Jimmy Carter suggested that we democratize Iran.  What occurred was  destruction of an ally in the Shah and replacing him with a purported force for democratization in the persons of the Ayatollah and the Mullahs.

Just look at what we got stuck with.  Our present course in the Middle East may be a repetition of this error.   There is no guarantee that what may be thought to be democratic for Westerners, may be counterproductive in a completely different arena.

Far from there being an Arab Renaissance, we may be witnessing the formation of a Islamist Spring, followed by an Arab Winter.  Hope may rise eternal that American style democracy can emerge from a fundamentalist, theocratic mindset.  This may be a thin blanket for a cold night.  Anti American and Israeli sentiments may not be far from the surface of what is though of as a movement toward Jeffersonian Style Democracy.   Suffice it to say, The U.S. may be imposing Western beliefs on Middle Eastern customs and traditions established for over a thousand years.

Such developments may well constitute exactly the opposite of what our strategists are planning.  Black swan anyone?  Turbulence, instability and uncertainty have usually been a prescription for precious metals and natural resources as a safe haven.

From where is all the money coming to pay for all these planned excursions?  Can an already troubled financial system handle additional burdens that threaten to break the camel’s back?

We read about debt limit, budgetary woes, foreclosures, unemployment, Eurozone debt crisis, the possible loss of a AAA credit rating and a myriad of domestic travails.  Shouldn’t we first repair our own home first?  Sound money and a sound fiscal body is vital for our national health.

Interestingly, the precious metals and mining indices are moving higher, while the equity markets are declining showing relative strength breakouts.  The Dow-Gold Ratio has shown a major breakdown through the 8 to 1 ratio.  We are seeing an eerily similar setup to the Great Depression and the 1970’s where paper money such as equities are seen as less valuable than hard assets.  Investors are seeking protection in precious metals due to this dollar devaluation and disappointing economic recovery.  Despite bailouts, record low interest rates and quantitative easing the Dow-Gold ratio shows that the economic recovery has been ineffective and inflationary.

Gold and Silver are showing signs of fortitude during these equity sell offs maintaing its status as an authentic safe haven .  A significant continuation in trend may be beginning where precious metals may move higher while equities continue to correct as investor look to hold real money over paper.  This breakdown in the Dow Gold Ratio signifies major inflation and economic weakness ahead.

The S&P is showing negative divergences between price and momentum an indication of further price decline.  The absence of relief rallies over five weeks in equities and the outperformance of gold indicates investors are interested to hold hard assets going into the conclusion of QE2.  All eyes are on the financial markets as QE2 expires.  Investors are exiting the dollar as well as equities and moving into hard assets.  The market may be signaling future accommodative measures especially if the equity market continues declining.

I invite you to follow my favorite sectors (precious metals, uranium and rare earths) with me on a daily basis with my technical intelligence reports and intra day chart videos by clicking here.

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Gold Soaring In Comparison To Stocks

WORST CASE – WAR

War is the worst thing that can happen to an economy, but it’s also the most likely thing at this point. When the going gets tough, the people in charge like to blame somebody else for the problem. That’s compounded by the foolish – but widely accepted – notion that war is good for the economy and that, for instance, it pulled the U.S. out of the last depression.

Like all wars, this one results in a complete stifling of civil and economic freedoms. If my second scenario is unpleasant, this alternative is grim.

The big conflict has already been teed up – the continuation of the Forever War between Islam and the West. I’ll hazard the major situs will be Europe – which has pretty much always been the case for wars in general for the last 2,000 years. Europe will be the worst place to be over the next two decades. And North America will be locked down like a police compound.

China will have serious social turmoil as it is forced to reorient an export-driven economy catering to Europe and the U.S. As in the past, South America will be out of the conflict and in a position to benefit from it. India will also be a net beneficiary, largely uninvolved, and happy to watch their ex-colonial masters rope-a-dope themselves into poverty.

People will always argue who really started it. Was it the Muslims when they poured out of Arabia in the 630s? Or was it the West when it invaded the Near East with the Crusades starting in 1099? Or was it the Muslims when the Turks took Constantinople in 1453 (although only 40 year later the Muslims would lose Grenada, in Spain, as the reconquista was completed) and then moved on to almost conquer Europe before being turned back at Vienna in 1683? Or is it more relevant just to look at recent history, starting at the beginning of the 19th century, when the West conquered and colonized every single Muslim country? Or the very recent past, when Muslims were counter-attacking, using a new military approach popularly called “terrorism”?

My bottom line is that the next twenty years may be dominated by the Forever War that started in the 600s, being resumed in earnest. At least in Europe, it has the prospect of becoming a war of survival, much nastier than either WW1 or WW2.

That resumption is being accelerated by what is going on in the Middle East now. The chances that the upheaval in the Arab world will just peter out and everyone will return to thestatus quo ante are about zero. It’s a culture-wide affair, much as the revolutions in Eastern Europe were. Or, for that matter, the revolutions against Spain in South America at the beginning of the 19th century.

The Arab revolutions are a good thing, in that they’re getting rid of criminal regimes. Some will be replaced with equally repressive cliques, although manned with different criminals. I suspect a few might be more like the French Revolution of 1789; good riddance to the old regime, but then came Robespierre. And after him Napoleon.

Regardless of how the tumult plays out in any particular country, the erstwhile docile collaborators with Europe and the U.S. are being elbowed aside, and the regimes that replace them are going to accommodate the vast public constituency for hostility toward the West, if only for the sake of internal political advantage.

The war is not going to be fought with conventional armies. First of all because the Islamic world doesn’t have any that would last more than a day or two against a Western army. But also because a Western army is useless against an amorphous mass of millions of people.

So what will the conflict be like? Amorphous and disjointed, chaotic and without fixed fronts. Millions of Muslims are in Europe – Pakistanis in the UK, Turks in Germany, North Africans in France, Indonesians in Holland. Europe’s destructive conquest of the world has come back to bite. These people will approach majority status over the next 20 years, both because they reproduce at several times the rate of the Europeans and because they’re not being absorbed. And because, now, millions and millions more are going to arrive as boat people.

The natives aren’t going to like it, for lots of reasons. And the outcome will likely resemble what always happens when large numbers of unwelcome foreigners invade a territory: violence.

One consequence of the war, and especially of the collapse of the regime in Arabia (in 2031 it’s no longer called Saudi Arabia, because the ruling Saud family – at least the ones who couldn’t get to their jets in time – has been massacred) is a cut-off of oil until the U.S. invades.

I hate to overemphasize oil, but the world still runs on it. When something does happen in Arabia, you can count on a disruption in the shipment of oil. And absolutely count on active U.S. intervention.

A prolonged guerrilla war, similar to those in Iraq, Afghanistan, Libya and other Arab countries will follow. But there won’t be any cover story about ousting a bad guy or bringing democracy to the oppressed. It will be pretty obvious to everybody that, from the West’s point of view, it will start out simply to answer the question: What’s our oil doing under their sand? But from the Muslim’s point of view, it will be a different question: How can we rid ourselves of these aggressive infidels once and for all? Then the West will rephrase their question to: These people want to kill us! How can we stop them once and for all?

You may be thinking that the U.S. can’t lose a war because it has a large and extremely high-tech military. All those expensive toys can be useful from time to time; they can win lots of small battles. But they’re basically useless for winning the next generation of warfare, as useless as cavalry in WW1, battleships in WW2, tanks in Vietnam or nuclear missiles today.

What? Nuclear missiles obsolete? Of course. They’re expensive, clunky, and the enemy can tell exactly where they came from. A plane, or a boat, or a truck – or a FedEx package – is a much neater delivery system. And there will be plenty of nuclear devices to deliver. If they’re within the grasp of tiny countries like Israel and North Korea, they’re within the grasp of anyone.

In fact, the centerpieces of today’s military are well on their way to the scrapheap or to museum displays. There may well be a few aircraft carriers, nuclear missiles, B-2 bombers, F-22 fighters, and the like around in 20 years. But they’ll be oddities reserved for special purposes, like typewriters. Laser, electronic and robotic weapons will have replaced those using gunpowder, and they’ll be readily available to anyone (an accelerant in the collapse of the nation-state). The military’s reliance on centralization and on computer power will prove an Achilles heel; a gang of teenage hackers (not only the best kind, but the most common kind) can devastate a military for pure sport.

Conquest of wealth or territory will be pointless; that’s one thing even the Soviets suspected in the ‘80s, when they still had the power to invade Western Europe. It’s now nothing like in the old days, when a successful war yielded lots of gold, cattle and slaves. This lack of an economic return will obviate one reason for a military. The hollowing-out of nation-states will obviate another; governments will find they just don’t have either the financial means or the popular support for serious military establishments.

The military, as the cutting edge of the nation-state, is in serious decline. Conflict between groups will still exist, of course, but it will be more informal, more the kind of thing that a Mafia or an Al-Qaeda might conduct. The growth of private military contractors, like Blackwater (now Xe), which only need be paid when in use, is indicative.

A BASIC PLAN

Sorry I can’t do any better than a best-case scenario that just isn’t very rosy – at least over the near term. And there’s a high likelihood of the worst-case scenario. There will probably be some overlapping elements from all three, if I’m on the right track.

From an economic point of view, I see only two things as being predictable: One, that many people will always produce more than they consume and save the difference; this will create capital, which is critical for not only a higher standard of living, but for the advancement of technology.

Two, that since there are currently more scientists and engineers alive than have lived in all previous history combined, technology will keep advancing; technology is the major force to advance the general standard of living. So that’s essentially why I’m an optimist. Let’s just hope the savers aren’t wiped out, and the scientists don’t do too much government work.

The most sensible plan for the next 20 years is to plan to survive. The days of “He who dies with the most toys wins,” and of two whole generations living way above their means, are over.

20 years isn’t forever. Think of it like a bear market, when the best thing to do is take your chips off the table, grab some books and retire to the beach for a year – except that this is going to be a lot longer and more serious. Nonetheless, I expect my fundamental optimism to get through it undamaged, as should yours.

For one thing, the long-term trend is favorable. Mankind has risen from subsistence and living in caves as little as 12,000 years ago, to reaching for the stars today – and the rate of progress has been accelerating. Why should that stop now?

But, as I mentioned earlier, thinking too far in the future is perhaps pointless. So what should you do now? The essential advice remains the same:

* Own gold and silver. At Casey Research, we’ve made a lot of money on them – and they’re no longer cheap – but they’re going higher, simply for lack of alternatives. Look at them as you would cash.

* Produce more than you consume, and save the difference. This is no longer the time for promiscuous, conspicuous consumption.

* Be alert for speculations. Some markets will collapse (for instance, I wouldn’t want to own a McMansion in the suburbs or a “collectible” car). Other markets will likely turn into manias, benefiting from trillions of new currency units (I suspect mining stocks will be one of them).

* Diversify your assets (and yourself) politically and geographically. As big a risk as the markets will be, your government is an even bigger one.

And, incidentally, we’re going to be looking carefully at the stock markets in the Arab world. It’s too early to buy. But there’s a time and a price for everything.

Our Economic Future: From Best to Worst Case
 originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

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Our Economic Future: From Best to Worst Case


The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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