The U.S. economy, as any astute financial observer has noted for years, is running on artificial wealth that has been manufactured by the Federal Reserve and swallowed by gullible consumers chasing that pot of gold at the end of the easy money rainbow. An alarmingly large percentage of U.S. economic activity is driven by consumer spending and the taxation of such activities. So when housing prices plummet and consumer bankruptcies start piling up, here's what we're going to see next:

My prediction for 2008 - 2012 is a massive wave of municipal bankruptcies, state bankruptcies and escalating national debt. We are going to see cities and states go belly up, pension programs terminated (or watered down), and financial institutions teetering on the brink of disaster.

And the worst part of it all? The only way out of this financial mess is for the Federal Reserve to steal yet more money from the American people by printing more money and hyperinflating the currency.

This is the part where the late Aaron Russo and his film Freedom to Fascism comes into play. If you haven't already watched this documentary on the massive fraud of the Federal Reserve and the IRS, watch it now at Google Video: http://video.google.com/videoplay?docid=5355374476580235299

This is also the part where Ron Paul comes in (www.RonPaul2008.com), since Ron Paul is the only Presidential candidate who understands the financial destruction being caused by the Federal Reserve and has pledged to end the Fed's control over the U.S. money supply. (The Fed, by the way, is a privately-owned corporation that isn't even controlled by U.S. lawmakers.)

But given that most Americans are still likely to vote for status quo candidates and not for the radical changes required to bring economic sanity to our nation, it seems inevitable that this nation won't learn its lessons about the laws of economics until the currency is near-worthless, the population is destitute, the banks are owned by wealthy foreigners and the neighborhoods are boarded up and abandoned due to a massive wave of foreclosures.

While all that's happening, of course, the Federal Reserve is going to be trying (in vain) to print its way out of the debt implosion by creating hundreds of billions of dollars out of thin air -- an act that quietly steals money from the people due to the loss of purchasing power (inflation). The amount of money needed to bail the U.S. out of its impending financial crisis will be so large that the real value of saved money in U.S. currency (i.e. dollars) could be reduced anywhere from 30% to 80%. Imagine: One day you have $25,000 in the bank that buys a car, and the next year, that same $25,000 only buys half a car. Nobody stole dollars from your account, but the Federal Reserve stole your purchasing power by inflating the currency while trying to print its way out of a national debt crisis! This is what's coming next.

The mathematically-impaired American masses, largely unable to follow basic economics, are destined to watch all this unfold with bewilderment, not knowing why their dollars are becoming worthless, but being rightly outraged by the turn of events at the same time. The MSM (Mainstream Media) will be no help, of course, since it's in on the scam. It will likely find some foreign scapegoat like blaming China's currency or Middle East oil prices for the disastrous effects of stupid domestic economic policies that have been pursued by Democrats and Republicans alike. (Of course, nobody has put the U.S. more deeply into debt than George W., largely thanks to spending on war.)

There's little question that hard economic times are coming, and not one in a hundred people has any real clue what to do about it. Not even many mainstream investment professionals, by the way -- they're the same idiots who probably told you to buy into the housing bubble in the first place, am I right? (Remember, through 2006 and 2007 when I was urging everybody to get OUT of the housing market, many investment "professionals" were urging people to keep on buying and leveraging their money in yet more housing! We'll all get rich! [Insert Howard Dean scream here...] Yaaaargh!)

So what can YOU -- the intelligent reader -- do with all this information? You're the exception to the idiocy of the masses, as is evident by the very fact that you get at least part of your news and information from non-mainstream sources. So how can you protect yourself from these hard economic times?

Here are some sensible solutions:
 

First off, let me share with you one of the best books on what's coming in terms of the U.S. economy. (It's also loaded with financial investment recommendations in the last chapter.) The book is called The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 A Barrel by Stephen Leeb.

Leeb is right on the money when it comes to understanding economics trends (and telling the truth about what's coming). He was one of the first to predict oil would reach $100 a barrel (which it did just a few weeks ago), despite the raucous laughter from the investment community following his prediction. (He predicted that price when oil was hovering around $25 a barrel, by the way...)

His book gives outstanding investment recommendations for those who have savings or retirement funds they wish to protect from the coming economic fallout. Rather than repeating that investment advice right here, I would prefer that you get his book, read it and the follow his recommendations that best suit your risk vs. reward goals.

Secondly, let me say that the great drunken spending orgy is nearly over for everybody involved: Households, cities, states and even the U.S. federal government. Although there may be a few remaining grunts and gasps of debt spending that manage to squeeze through the cracks, the bottom line is that this debt bubble party is essentially over. This means we're going to see a contraction in spending at all levels, and a significant lull in the national economy.

You see, until now, we've actually been partying on China's money. It's true! China has been lending the U.S. hundreds of billions of dollars, and the U.S. has been using that money to finance wars and lousy health care spending policies that keep the American people perpetually diseased. This nation has actually been partying like a rich banker's daughter on her 21st birthday who borrowed daddy's credit card and hit the town for a night of (finally) legalized drinking. It's largely been someone else's money that has financed our drunken-sailor spending spree, and that line of credit will soon be significantly slowed (or made a whole lot more expensive to finance).

Why? Because the United States will, I predict, lose its AAA credit rating in international debt markets. With the U.S. in debt far more than ever before -- and hemorrhaging wealth by the second through spending on war and disease (health care) -- it won't be long before the serious lenders of the world (China, Japan, Abu Dhabi, etc.) figure out that loaning money to the U.S. Treasury Department at low rates of return is an idiot's gamble. They'll hike up the rates for future loans to the U.S., and that will cause the U.S. federal government's debt spending addiction to suddenly become a more expensive habit than a D.C. Mayor's crack addiction.

Overnight, the U.S. could become a sub-prime borrower. Its banks have already landed in that category, thanks to the huge cash injections from wealthy foreigners we've seen taken on by U.S. banks in the last few weeks!

And all this, of course, means yet more contraction of the U.S. economy.

Getting back to how you can protect yourself in these hard economic times, this is a time to control your own spending. Here's what I've consistently recommended to intelligent people over the years:

1) Own your car. Don't borrow money to drive a car. It's better to own a beater than to make payments on something you can't really afford.

2) Own your home. Instead of moving to a larger home when you qualify for loans, work to pay off your existing home mortgage and own your home outright. At the very least, pay down your loan so you have 50% equity in your home, which should insulate you from all but the very worst housing bubble price drops.

3) Stop spending money on stupid overpriced things like Starbucks coffee, soda, brand-name laundry detergent, diamond jewelry and processed foods. Stretch your money by buying low-cost, bulk food ingredients like lentils, brown rice and quinoa.

4) Protect your health! Mark my words: There will be no such thing as a national health care system that's any good; not under ANY future president. Why? Because our entire health care paradigm is focused on treating disease rather than promoting health. If you're waiting around for a health care system to make you healthy, you're on a fool's errand. Take charge of your health right now and use nutrition, superfoods, sunlight, exercise and avoidance of all toxic chemicals to boost your health (and thereby insulate yourself from future health care minefields).

5) Own some productive land. Can you actually grow at least 10% of your own food? How about 25%? Owning productive land that actually generates fruits, nuts or edible herbs and plants is a form of permanent wealth. Regardless of what happens to the world economy, land that can produce food and medicine will always hold value (to yourself and others). Climate matters. An acre of land in wind-swept South Dakota isn't worth much. That same acre in Southern California or Hawaii is a whole lot more useful in terms of producing things that people value.

6) Own a good bicycle (and know how to repair it). There's no form of transportation that's more affordable. Too out of shape to pedal? No worries: Get yourself an Electric Bike from Electric Bikes Northwest (they ship all over the country). Electric bikes cost almost nothing to operate (far less than a penny per mile) and still give you a bit of exercise.

7) Don't save all your money in one bank! And certainly don't save it all in U.S. currency. Diversify. Banks may fail. The currency may even fail. Be prepared to wake up one day and see your green U.S. dollars declared worthless.

Disclaimer: I'm not offering you financial advice. Do your own research on this and make informed financial decisions using the help of financial professionals. My information here is offered as-is, with honest intent but no promise of accuracy. You'll have to decide for yourself what's really ahead in terms of a bankrupt nation and a depressed economy.

It's not all bad news, by the way...
 

The good news in all this is that the U.S. government simply won't be able to afford its campaign of imperialism and war mongering against the nations of the world. Troops will eventually have to come home for one good reason: The government will no longer be able to afford to pay them! (What? No Pay? Watch all those soldiers turn around and head directly home when the money stops. The proper term for such employees is "mercenaries," by the way...)

Much the same will happen to Big Pharma and the massive medical scam right now masquerading as health care in the United States. When the U.S. government can no longer acquire easy debt money, the monopoly-priced spending on pharmaceuticals through Medicare and Medicaid will have to be halted or significantly reformed. Somewhere along the line, somebody might get the idea that we could halt health care spending by 90% in a single decade by simply investing in disease prevention and health education rather than pushing pills and disease. So the good news is that a bankrupt nation will eventually be forced to just say no to Big Pharma's monopoly-priced drugs.

So far, not bad, huh? Ending stupid wars and dangerous health care practices is definitely a step in the right direction, and it's all coming our way soon thanks to the inevitably bankruptcy of the U.S. government and the downfall of the U.S. economy. There's nothing like a sobering economic wake-up call to force nations to either reform their ways or face extinction.

From there, lots of possibilities exist. The centralized U.S. government might become so weak that regions of the country would declare their independence and begin self-rule. (Happens all the time: See the history of the Balkans, the former Soviet Union, post-Spanish rule in South America, etc.). Each region might then invent its own currency to replace the disastrous dollar. Tip: Only those currencies backed by gold reserves will ever work in the long term. Paper money simply doesn't hold value (as we're all seeing quite clearly right now...)
 

I see 2008 - 2012 as being very tumultuous years for the United States of America. This nation is technically bankrupt right now. And do you know where the spending is going? Check this out: The top three things that the U.S. government spends money on are: (figures from 2006)

1) WAR: Department of Defense + Veterans' benefits ($580.5 billion)
2) DISEASE: Medicare + Medicaid ($614.1 billion)
3) DEBT: Debt to the people (Social Security + Welfare) and to debt holders (interest on national debt) ($1,115.4 billion)

What's fascinating about all this is that these three things take up 85% of the federal budget! (Total 2006 federal budget was $2.7 trillion.)

Yes: 85% of the federal budget goes to pay for war, disease and debt. Need I say more? That fact right there should tell you all you need to know about the future of this nation: The U.S. is about to become history. In the history of the world, no nation that spends 85% of its budget on war, disease and debt has ever survived for more than a few years. (Rome spent far less on war and still couldn't keep its republic together...)

For all those readers who agree with me on my anti-war stance, don't worry: We'll all get our wish soon! The U.S. is so bankrupt that waging war will soon no longer be an option. President Bush has done what the terrorists could have only dreamed of doing: destroying the future of an entire nation and watching it implode under the weight of its own debt. (If you thought the collapse if the Twin Towers was something, just wait until you see the fall of Wall Street...)