From a recent Newsweek article: 

The specter of depression stalks America.  You hear the word repeatedly.  Are we in a depression?  If not, are we headed for one?  The answer to the first question is no; the answer to the second is “almost certainly not.”  The use of “depression” to describe the economy is a case of rhetorical overkill that speaks volumes about today’s widespread pessimism and anxiety.  A short history lesson shows why.

The Great Depression of the 1930s – the last time the term rightly applied – was industrial capitalism’s worst calamity.  U.S. unemployment peaked at 25 percent in 1933; it averaged 18 percent for the decade.  From 1929 to 1933, 40 percent of U.S. banks failed.  People lost deposits; businesses and consumers lost access to credit.  Over the same period, wholesale prices dropped a third, driving farmers and firms into bankruptcy.  Farm foreclosures, shantytowns (called “Hoovervilles,” after the president) and bread lines followed.

This was a social as well as economic breakdown.  Our present situation bears no resemblance to this.  In June, employment was 5.5 percent, slightly below the average since 1960 of 5.8 percent.  It’s true that banks and investment banks – Citigroup, Merrill Lynch, Wachovia – have suffered large losses.  But on the whole, the banking system seems fairly strong.  Although profits in the first quarter of 2008 were down 46 percent from 2007, they totaled $19 billion even after $37 billion set aside for loan loss revenues.  Overall corporate profits are still running at a near-record annual rate of $1.5 trillion.

Read the entire article here. 

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Congressman Ron Paul explains in simple language the price Americans will pay for the recent housing industry bailout: 

Here’s My Take:  If you’ve read my book, you know that inflation and debasement of the dollar is going to be with us for a long time.  Probably for the rest of our lives or until enough people get fed up with the current system.

That’s why the best advice I can give is to become a student of inflation, monetary policy, and their impact on your buying power.  For as long as the government continues creating money out of thin air, any wise investor will keep the bulk of their long-term investments away from dollar-denominated paper assets. 

But to quote the great U.S. economist Milton Friedman:  There is no free lunch.

That’s why I put up with the short-term volatility that comes with trading my dollars in exchange for real assets.  My goal is to accumulate more wealth, not money – it’s a big difference.  Money can be created out of nothing but wealth (stocks, precious metals, businesses, raw materials, etc.) are tangible and carry greater value. 

If we someday enter a stage of hyperinflation similar to what Germany experienced in the 1920s, which would you rather own:  a pile of cash or a pile of companies located around the world?  Money or wealth, you decide.

Only one can make inflation work for you instead of against you.           

Related posts:

1. Gut Check Time and the Transfer of Wealth
2. Adrian Van Eck on the Housing Market
3. Speculators gamble while investors build wealth