Sowing the Seeds of Hyper Inflation: 5 Reasons the Bear Market is Getting Worse

There has been a lot of buzz lately about reviving the economy, and rightly so. People are losing their jobs by the thousands, causing unemployment in this country to soar higher every day.

If the government is successful at turning the U.S. economy around and ending the current credit crisis, it will only be because the system was overloaded with trillions of worthless paper dollars, sowing the seeds for eventual artificial inflation in record amounts.

If the economy were to pick up, between intense inflation and resumed economic growth, gold demand across the globe would absolutely soar. Why? Because people will realize the true value of gold versus the man-made, fluctuating value of paper money.

The Fed raised interest rates 17 times, in steady quarter-point increments from a low of 1 percent up to 5.25 percent, in the span of late 2004 to mid-2006. During that short period, the value of gold surged 127 percent!

To further prove my point, consider this: even with the current state of the economic downturn, the demand for gold surged to a record high of $79 billion in 2007 and $102 billion in 2008. And this happened despite strong nationwide conce
s for a depression unlike anything this country has seen in 80 years!

Think about what would happen if the Fed's recent actions take effect and the economy makes a comeback. Gold demand will skyrocket, and you know what happens when demand exceeds supply....the price shoots up as well.

With that in mind, now is definitely the time to get in on gold as an alte
ative investment opportunity before prices go through the roof.

5 reasons why the bear market is here for good (and getting worse by the minute!)

Reason #1:

The Banking Crisis Wasn't Magically Fixed ... It's Actually Getting Worse!

The U.S. government has thrown roughly $356 billion of taxpayers' money at our country's banks, but the problem hasn't magically solved itself. In fact, the situation is spiraling downward at an alarming rate.

That money could have been put to much better use than fueling bonuses for AIG executives and bad trades from AIG to Goldman Sachs and JP Morgan, to name a few. I'm thinking that $356 billion could have more than jump-started our economy if it had been allocated a little more wisely. But that's a topic for another day.

What's done is done. So, $365 billion of taxpayers' hard-ea
ed money has gone into the banking system to help counter some of the nation's mounting toxic debts (which are mortgages, car loans and other secured debts that people are simply walking away from).

Unfortunately, the International Monetary Fund (IMF) recently estimated that toxic debts could soar as high as $4 trillion. In January of this year, their estimate of toxic debts was $2.2 trillion. A jump of $1.8 trillion is quite alarming and indicates that the banking crisis is nowhere near over.

Reason #2:

Job Losses are at Levels Unseen Since the Great Depressio

In short, the job loss is nasty, and it's going to keep getting worse before it gets better. The national unemployment rate rose to 8.5 percent in March as 663,000 Americans lost their jobs. If you looked back over the past six recessions, you would see that this current pace of job loss is the worst it's been in over 30 years.

If you have a job, count your blessings. Be thankful that you have money coming in to put food on the table and a roof over your head, and keep looking toward the future.

Reason #3:

The Housing Market Just Keeps Taking Hits

As of January of this year, the Home Price Index was down 19 percent from January of 2008. Just a month before, that year-to-year decline was 18.6 percent, so you can see that market values are steadily declining.

Because of the job losses we talked about in reason #2, many Americans are struggling just to pay their current mortgages, and alarming numbers are walking away from their homes and the corresponding mortgages. They certainly can't afford to buy new homes right now.

And the Americans who haven't been hit as hard financially are too scared about the potential of job loss to even think about taking on a new home loan.

Unlike the government, everyday citizens can't create money out of thin air, so we're pretty much powerless to turn the housing market around. Looks to me like the problem is going downhill fast with no immediate relief in sight.

Reason #4:

This Recession Goes Beyond Our Borders

When Japan suffered from ten years of an economic downturn, the rest of the world's healthy economies helped pull Japan out of its funk. Things are different this time around. The World Bank is estimating that global economic growth will slow significantly enough to cause a decrease in the global economy -- a drop of 1.7 percent, to be exact -- for the first time since World War II.

The World Bank predicts that developing nations will keep growing, slowly but surely. The sharp drop in GDP for the developed nations in Europe and the Americas will be painfully obvious, on the other hand,

Not to end on a bad note, but just a reminder that we've only been experiencing this current economic crisis for one year. The world economy saw declines for three years after the crash of 1929, and world trade is falling even faster now than it did during and immediately following the Great Depression.

Reason #5:

A Government-Inspired Rally of the Stock Market Has Made This the Time to Sell

Now is the perfect time to sell every stock you own. If you have a 401k, don't break it up; move the funds to a self-directed IRA or standard money market fund. Stay away from long-term bonds until interest rates start to surge. Inverse ETF's are also a good bet right now because of the market, which is bearish until proven otherwise!

The main point here is that company expectations are very low, so it's not too late to get out of the stock market without taking more of a hit than you might have already.

If you keep your money in stocks, expect a decline of 37% from last year at this time. Not to mention the fact that all 10 groups in the S&P 500 are anticipating an overall decline in profits this year, thanks in part to the previous four reasons in this article. (Side note: a decline in all 10 groups is highly significant and further proves that you should be withdrawing your money as quickly as possible.)

No one has money to spend these days. Companies aren't producing as much and with the global economy in retraction, the S&P will only continue getting smaller.

Just to be clear, the stock market still has a long way to go before it's completely hopeless, but it's well on its way. Which brings me back to my original point: that now is the time to sell all your stocks and invest in safer, more profitable alte
ative investments.

Families are facing hardships that haven't been seen since the Depression era, and more and more American companies are declaring bankruptcy and closing their doors. Something needs to be done to turn our economy around, and I think mining gold and other physical commodities could very well be the cure to the problem.

I'm sure we could all use a little more wealth these days -- without sinking the next generation even deeper into debt!

Watch for my next article, which will spell out five things you can do to protect yourself in this continued recession or pending depression, no matter where our economy heads.