The Catastrophic Consequences of America’s Economic Crisis

The current U.S. financial crisis is much worse than anyone’s letting on. David Walker, the United States’ comptroller general, has been sounding the warning alarm that things will quickly go from bad to worse if we don’t do something, and soon.
In fact, Walker recently revealed in an interview with Steve Kroft, “I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility,”

A shocking statement, especially coming from America’s top accountant, the man who keeps our government’s books and knows better than anyone else the true state of our country’s finances.

Walker adds that America is suffering from a fiscal cancer that will cause catastrophic consequences if left untreated. He warns that if nothing changes in the next thirty years, the federal government will be so consumed with paying interest on mounting debt and entitlement benefits like Medicare and Social Security that it won’t have much equity left for other necessities, such as national defense, homeland security, and education, to name a few.

The federal government isn’t the only one struggling financially; as you know, the American people are facing tough economic times also. Here’s a sad truth: your money is worth much less than it was last year at this time, or even five years ago. What should be going up in value is steadily spiraling downward, a fact that many investors don’t fully grasp.
Investors like Warren Buffet “get” it. In a recent article in The New York Times, Buffet declared, "Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts."

Experienced investors like Larry Edelson believe that holding onto a mixture of cash and gold right now are the safest investments.

You may be leery of investments of any sort right now, but, as Edelson points out in his article titled “Seeing Through the Panic to Profits,” a quick stroll down memory lane should cure your apprehension. Folks living through the severe recession of 1973-75 are probably kicking themselves for not stocking up on gold, which soared from around $130 to a staggering $850 by January of 1980. Those who held investments during the 1987 stock market crash most likely wished that they had loaded up on stocks in the aftermath of the devastation. If, knowing what you know now, you could travel back to the year 2001, just after the 9/11 tragedy, would you grasp onto commodities such as gold and real estate to help build your portfolio? My bet is that you would in a heartbeat.

The moral of the story is this: the markets fluctuate, but even the most devastating downtu
s eventually pick themselves back up again. The key is to be smart about your investments, and you’ll be just fine.