Following on Silvernuts post, my updated rant for the weekend.

US Economy = "Inflationery Recession". Compiled by E.G. Version: 2009June.
( Note: I am no authority on this subject, just a Canadian putting down his observations, frustrations, opinions and suggestions.)

1. The cause of US economic problems is debt and contributions to it through deficits and credit.

2. The method by which you did get into that debt was due to high wages that caused large corporations to go off shore for production of goods you need to buy. They have no allegiance except to make profits for their owners. Through those purchases (imports) your cash went out but too little returned in the form of exports. Result, net cash outflow which causes deficits and eventual debt.

3.Deeper cause that goes back in history is having a private bank "The Fed" acting as the nation's bank. That lead to lack of control by the nation and left the door open to
manipulations of the economic system by private interests. Those interests are not only after mere monetary profit but after power.

4. The debt is financed through interest payments on securities and bonds that are bought by foreigners with their aquired US dollars. These interest payments further contributes to outflow of more wealth.

5. Another major cash outlet: Oil (and other resource) imports appreciate in price because priced in cheaper dollars and speculating (politics not helping). No real effort was made to use oil more efficiently (Kyoto Accord?). What price drop you see now is directly due to slow down of global economy. Will rise once the taps are turned down to adjust to the present situation. Watch out in Fall of 2009.

6. Because of debt and resultant outflow of cash more currency has to be printed to keep the economy going (so called liquidity), dilluting the value (inflation). More cash means more offerings at lower interest rates to fewer takers to get the cash to earn interest, at least in the beginning. There is a bottom. Basicly US government is forging money.

7. Foreigners will not hold on for a long period to depreciating dollar if it is not
supported.
( "I now believe that at present, the US current account deficit is indeed unsustainable, and I expect the dollar to fall (perhaps sharply) against other major currencies over the next few years." Robert P. Murphy on 8/13/2007 )
The last half of 2007 has seen the largest short term credit up to that time. Correspondingly Fall of 2008 saw the result. 2009 sees proposals (Russia & China) on the dollar not being used as a world reserve currency. Some are begining to sign contracts in other currencies instead of dollars.

8. Interest rates must rise to support the dollar, compensate for depreciation. Higher
interest rates make it worth while for foreigners (ex.Japan, China) to hold on to dollars. BUT interest rates also need to be kept down to support the local economy, forestall bankruptcies, represent false security and prevent a financial collapse. This is a conflict.

9. The printed cash has been readily lent out to the banks, which did same to their customers.
Due to the flood, interest rates went down like any other commodity in surplus. The more of it there is the cheaper it becomes.
Those clients spent it like there was no tomorrow. Example - House mortgages given out with no down payment and no ability to pay back even at very low interest rate.

10. Real money ( mainly because it can not be counterfitted), such as gold and silver, has to be kept out of the public's hands and eyes so that they will not flock to these alternatives and further depreciate the dollar. Perhaps these metals will be confiscated again as in 1933 ( actually stolen by the government) should a crisis occur, i.e. a flood of buyers to them.
(http://www.321gold.com/editorials/casey/casey033009.html and
http://www.garynorth.com/public/4857.cfm)

11. Foreign holders of dollars buy out US assets causing profit dollars from these assets to leave country because larger portion of country owned by foreign hands therefore eventually even more dollars will end up there.
("And the valuable assets that the Chinese are after are not bonds, but real assets such as land, real estate and key US corporations, the same corporations that have made much of their money thanks to outsourcing into China." Boris Sobolev Aug 14, 2007)
The chinese are already buying (diversifying), once they have spent most of their dollar hold the gloves will come off. The renminbi(yuan) will be allowed to float and become one of the world currencies.

12. Interest rates and inflation slow down the individual's purchasing power (mortgage, credit card etc.) triggering more debt and bankruptcies. Bloomberg headline in February 2009 reads "More Than 8.3 Million U.S. Mortgages Underwater as Values Sink", ( current defaults are just a tip of an iceberg). Country was in a recession since begining of 2008 ( denied then) as interest rates were kept low, while real inflation is above 10 percent. Now they admit to recession, calling it 'severe' or in danger of becoming a depression, currently labeled "Inflationary Recession".
Well you are in a depression now, it is that the effects have not spread themselve out yet so it is not obvious and it is not politically correct to say so. Just Look at California, a
linch pin of US economy.

13.Lower purchasing means lower demand for high cost local production = less local jobs and more imports.

14. Then lower tax revenue results in fewer government services ( note recent infrastructure situation), greater deficit & debt, more dollars printed ( Repetition ).

15. House prices drop due to defaults (then higher interest rates or taxes follow to pay for those defaults or the institutions will go bankrupt, example AIG), lack of good jobs ( as in big three auto ), lower incomes and finally fall due to average Joe not able to afford (foreclosures). Also lower house prices means fewer tax dollars, more deficit and cutting of services. Those government hand outs to the banks end up in their pockets and little tricles down to their customers. It is a rescue package for the financial institutions instead of the nation's economy.
House prices will eventually rise after the dollar they are priced in hits bottom. Shanty
towns will rise.

16. Eventually foreigners ( China, Arabia?) will get tired of holding ( perhaps due to
politics or ending their dependence on exports to US) depreciating dollars and dump
(catastrophic collapse?), dollar which will be severely devalued. (China already dumping
through purchases, except that they are retreating slowly not to diminish dollar's value and 'shoot themselves in the foot' through their current hold and export market. Converting dollars into hard assets, other currencies and gold. )
Canada and Australia are safe sources for those raw materials.
<
China’s spending spree likely to include Canadian companies
Duncan Mavin, Financial Post Published: Wednesday, March 04, 2009
Jim Sinclair:
"HONG KONG - Asia’s dealmakers say a Chinese resource spending spree will accelerate
throughout the next 12 months, with Canadian mining and energy companies likely on the shopping list."
>
You are seeing interest rates near zero and the powers are begining to admit that this avenue of control is at bottom. The interest rates are below Japan's, the traditional low interest country. So who will want to hold onto US dollars if they pay no interest. Better to invest where there is some gain or security.

17. Wake up!
Financial crisis is not the cause, housing crisis is not, oil price is not, even the deficit
is not the cause, they are just Symptoms.
It is the Debt, the outsourcing of jobs, the incompetitive Wages and lack of US government regulatory policies with excessive credit that are the root cause. You could add that having private banks controling your money is the ultimate cause because they lobby the government for their interests instead of yours.

Recession has been around for at least a year and it appears that a depression is already present in US. Depression's effects have not entrenched themselves throughout the population ( particularly the policy makers) so the reaction is slow.
Job losses, 600,000 just in January, 650,000 in February?, are the result ( Over three and a half million in the 12 months ending in February 2009!). Five million collecting unemployment benefits by February? Four trillion dollars of your money is likely to be spent to support the welthy special interests that got you into this mess. Do you need to see bread lines or riots to realize that the depression is here? There have been riots in France.
Freddie Mac chief apparently commiting suicide, does that not remind you of 1929 stock market crash and a fellow jumping off a building?

18. Most significant of all - American public has been kept ignorant of above until the
results hit them ( Due to false reporting of consumer indexes, joblessness, stock and precious metal price manipulation, false credit ratings and many so called experts singing the government's tune). Your government instead of protecting your interests has worked for the rich and powerful. Due to ignorance your trust has been abused.
The late wake up call has precipitated the election of Obama who has to shoulder the burden and the blame for making you pay for your ( and previous administrafion's) negligence and excesses of the past.

From: Economic Collapse in September? by Clif Droke GSR snippet May 19, 2008
"According to the Australia.TO newspaper, as reported in the May 2008 Last Trumpet Newsletter (LTM), several congressmen were so incensed about what was discussed behind those doors that they were compelled to leak the contents of the meeting. Following is what is rumored to have been discussed: Imminent collapse of the U.S. economy by September 2008; imminent collapse of the U.S. Government finances by February 2009; possibility of civil war within the U.S. resulting from the collapse; detainment of "insurgent U.S. citizens" in anticipation of their moving against the government; the potential for violent action taken by citizens against members of Congress due to the collapses; the merger of the U.S. economy with those of Canada
and Mexico as a solution to the collapse; the introduction of a new tri-national currency
called the "AMERO" as another economic solution."

Side note about Canada (because I am a Canadian):
Canada is not in trouble to anything close to that of the US. We have a recession now. We are a net exporter of oil ( to the US) and have a different financial system. What contagion is present is mostly through buying into US poison and loss of manufacturing destined for the US. You could add our Bank of Canada Governor being from US and government following some of US failed practices so our citizens are just as ignorant of the happenings about them.

Example: Canadian mortgages are mostly with at least a 5% down payment. In Canada by law every mortgage is insured. The junk mortgages that are at an extent of 40% of total in the States, the equivalent are only 4% of Canada's. The main contagion is due to the N.A.F.T.A. where we are dependent on manufacturing exports to the U.S. and if U.S. does not buy our products we have massive unemployment. Net result is a different world. No wonder some US institutions want union with Canada ( i.e. "Amero" currency). But like any other disease, there are no boundries to hold it back.

Recession here, begining depression.
"Inflationary recession' is in US, some now call it "deep recession". The 'Deep Recession'
phrase is code for depression at your door step. Note that it does not arrive over night. It takes time for the job losses and foreclosures to accumulate. Only then is it's full bite
felt.
Prepare for much lower valued dollar, reducing purchasing power. Higher priced imported commodities. Domestic production at lower wages and unemployment in double digits. Average american poorer due to rampant inflation in commodities and services relative to income, recession present and now acknowledged but depression is still a dirty word that is avoided.

The US will not be the first to recover but the last one due to the highest amount of debt per capita and delay to take effective remedial action. The second ( now Obama's) money payout is insufficient and only delays. Probably two or three trillion $ will be needed.

Long term adjustment - Government
Eventually the public realizes that the cause of inflation they see is not global but mostly local ( Read Peter Schiff http://online.barrons.com/article/SB121460948834112305.html?page=sp
) - government policies and debt the villan ( Scapegoat? ) coupled with poor practices that are not regulated (Free Market?).
Regulations have to serve the producers of value instead of parasites of value.
Government using public money to bail out the rich (banks) for their spending excesses and fraudulent financial practices. (American International Group, the insurance giant has lost $61.7 billion for the last quarter of 2008, the biggest quarterly loss in corporate history.)
They grow rich and now that things have turned around instead of them paying back for their gluttony the government uses public purse to save them (Socialism is OK for the rich but not for the have nots).
Electing a new president (Obama) is a major step towards a solution but you need Congress to be fully behind him to face the problem and institute solutions. He can not do it himself especially if the people's representatives ( Republican?) continue to play partisan politics at your expense.
Obama had to embrace in his administration some of the very people who caused the problem so a solution will not come easily nor quickly, i.e. playing the political game. Probably those very people are pulling the president's strings.

Your government has been printing 'Money' to keep the economy solvent but that policy only postponed the crunch and got you deeper into trouble. That practice has to cease. The guilty have to pay for their mistakes. No bail outs!
The fresh cash should have been used to assist the ordinary citizen with his mortgage payments instead of handing it over to the big banks for their executive's perks.

Personal Answers.
First cease the credit gluttony. Purchase with cash on hand instead of credit. If you have no cash then you can not afford it.
Next you need to protect your wealth, if you have it, while not squandering it.
Invest in precious metals (real money), to lesser degree industrial/necessary resources with real value (production over consumption), energy ( oil, uranium ), basic commodities and necessary services ( Food - everyone has to eat, health needs ). The world is not coming to an end but merely slows down. Basic necessities are in greater demand and are developing shortages. Unfortunately, invest or move to foreign jurisdictions that may be more immune to above effects.
Keep the necessary cash in an insured bank to the extent of the insurance. Keep enough cash on hand so that bank closures or disabled internet banking will not leave you empty handed. If holding bullion and residing in States, keep bullion and valuables personally instead of safety deposit box in bank - could/will be confiscated.
( Central Trust of Canada (CEF) and the all gold counterpart Central Gold Trust (GTU) as an alternative to holding physical bullion oneself. Don't trust the usual ETFs, (GLD, SLV) they lend out their PMs and seem not to hold what they claim.)

Following note from Ameritrade:
(Dear Valued Client,
On December 1, 2008, the Securities and Exchange Commission (SEC) approved a rule change that will eliminate the ability of Depository Trust Company (DTC) participants - including TD AMERITRADE - to request physical certificates for securities positions participating in the Direct Registration System (DRS). This change will take effect on January 1, 2009.)

If you can not get physical proof of your stock holdings then you are isolated and vulnerable to manipulation and confiscation. Did I mention lack of regulation? Well this is an example of an opposite regulation digging a deeper hole for you to fall into.

Comfortable for how long?
Be prepared by going into safe mode - buy PMs, commodity stocks and particularly gold and silver bullion (no ETFs). They are at severaly depressed prices now and it goes against all logic to be sustained, your last opportunuty to buy in before the expected surge ( no guarntees when ).

Tax the very rich?
Many will leave country (many have placed assets abroad). They are hoarding real assets. Switzerland refused to provide info on deposits in their banks ( US claimed 'tax evasion') now they seem to be bending over to pressure.
http://www.ft.com/cms/s/0/bf8246aa-8f13-11dd-946c-0000779fd18c.html).

Avoid frills, the unnecessary things to life such as: vacations, restaurants, credit card,
gambling, alcohol, tobacco, fashion items, yes including 'gold' jewelry etc.
Get used to the idea that in your old age there may not be any governmental security and you will have to provide for yourself. Government is not likely to go into bankruptcy to help you out.

Force the government off the credit mentality, and be willing to take it on the chin in the
mean time. Live with the consequences of a recession and prepare for a depression. Try to take hard measures, example tougher regulations and enforcement. Change the government from spending today and paying tomorrow because that is what got it and you into trouble and continuing on that path gets you into deeper trouble.

Example - all mortgages should include a substantial down payment before being granted (no more 100% mortgages). Do not let the government in your name pay for the risks taken by others. Let them fail, that is their price for the risk they took on. It is a learning lesson for them that should not be denied and an example to others should they be tempted to follow same route.
Limiting lobbying is a start but it needs to go deeper than that. Lobbyists have subverted your democracy by making your representatives pay more attention to their interests than of the citizens they are supposed to represent.

Keep US government from involving the country in costly foreign military adventures.
Get used to idea that other nations will dictate terms to US instead of being dictated to.

Beginings of depression are here, don'panic but take precautionary measures.

Big financial failures began in 2008 (Bear Sterns, Lehman, Fannie & Freddie), over 100 at risk.
Red blood will flow through all kinds of institutions following 2008 as the bad debts are
written off, ratings and profits plunge, jobs lost or replaced with lower pay. (Some
institutions may be good investments AFTER they hit bottom, when will that be?)
Government using public purse to pay for bad/fradulent decisions of government and
corporations.
Artificial depression of precious metal prices will cause recoil like a coiled spring.
Dollar to 70, gold to 1200$US in 2009?.
Gold and silver bullion rising first mainly on foreign buying to be followed by gold and
remainder of PM stocks ( majors first, followed by demonstrated explorers) but in end silver and silver stocks to appreciate the most because of historic undervaluation and recent shortages. It could happen explosively any time - Like over night.

When does a recession become a depression?
http://business.theglobeandmail.com/servlet/story/RTGAM.20081216.wdepression16/BNStory/Busines
s/home?cid=al_gam_mostemail

STEVEN CHASE From Tuesday's Globe and Mail December 16, 2008 at 4:16 AM EST
OTTAWA — A well-worn joke says that a recession is when your neighbour loses their job - and a depression is when you lose yours.
But in reality it's hard to find a clear-cut, agreed-upon definition of what constitutes an
economic depression.
Most attempts to define it do so in terms of recession, which is technically defined as two consecutive quarters of shrinking economic output.
"There is no such definition for a depression, other than a prolonged and pronounced
recession," says Finn Poschmann, vice-president of research at the C.D. Howe Institute.

Land of Freedom?
Humbug, only for the very rich and powerful.
You have forgotten what democracy really means.
Lobby system of the powerfull has usurped the democracy that was intended.
Not so very long ago the dictatorial communists were accused of undermining democracy and all sorts of means were used as an excuse to fight them (ex. McCarthyism), so what means are excusable and used now against rampant capitalism? Yes, Public purse.
There is no effective and true communism to keep capitalists in check. Russia gone
dictatorially capitalist, China followed their example and North Korea is a joke even to
communists. Hence Bush administration had defaulted to terrorists as a scare tactic to keep power.
Obama will be forced to make you pay for the excesses of previous administration. Don't blame him, you did it to yourself.

Europe has internal problems with EU coexistance while a supposed US friend, do not count on them as a stabilizing force. They also bought into this paper debt so the Euro is also suffering.

So who and how is going to restore true democracy? China?, fat chance with their record of suppressing freedom ( ex.Tibet).

Average Joe American has been lulled by propaganda and is just waking up from under a blanket of freshly printed paper (dollarS). US is the main source of the problem which has been sold onto me and the rest of the world.

The sooner you clean house, however painfully, the better off we all will be.

Hope it was not too borring. Ed.