How to protect yourself and your family

Over the course of his 30-year career, author and consultant Gerald Celente has demonstrated an uncanny ability to forecast the “Next Big Thing” in economics, geopolitics and social change, identifying major trends, including the dot.com crash and the current real estate bust.

His views of what’s ahead now…

SHOCK WAVES SPREAD

The global financial crisis is tremendously scary — but various government leaders, corporate titans and even cable-TV commentators have been trying to assure us that if we don’t panic and we exercise patience, it will pass without much lasting harm. They say our deposits are safe, the stock market will eventually rebound and the American way of life will essentially remain the same.

  • Beware of this smoke screen of denial and ideology. The truth is that our leaders don’t have a handle on how much damage will result, so they frame the future the way they want it to be.
  • Think for yourself. Wall Street and Washington, DC, have been cooking the books for years and twisting facts to hide the rot eating away at our nation’s financial superstructure. Each time a distressed economic sector fails, it is patched up with bailouts, buyouts and other cosmetic fixes.

    The year 2008 has been our economic 9/11. The crisis goes way beyond the subprime mortgage loans that the “little people” can’t pay back. It includes failing banks… busted brokerages… reeling automakers… and the possibility of states in default. The shock waves reverberate through more than just our investment portfolios. They have profound implications for our society, our culture and our day-to-day reality.

    My purpose isn’t to frighten you with doomsday scenarios, but we must consider the possibility that our lives and our futures will be very different. Try to understand what’s going on, and take measures to protect yourself — and even benefit — from new emerging trends on the American landscape.

    Unfortunately, the economic crisis has hit so swiftly and powerfully that many options are off the table. Nevertheless, for many of you, there are measures that can be taken to minimize the damage. And for all of you, it is helpful to assess the situation realistically without succumbing to panic and despair.

    Even if the apparent recession turns into a depression, as I predict, life will go on. There will be jobs, careers will flourish, and food will be grown. Understanding where we are, how we got there and where we’re going will help us to find opportunities in these trends…

    TREND: DECLINE OF THE DOLLAR

    America’s going broke, and the whole world knows it. We are burdened with $10 trillion in debt, and that’s a credit risk global financiers are less and less willing to take. Since early 2000, the sickly dollar has lost about 25% of its value against the euro despite recent gains. Government economists explain that the dollar collapse is “beneficial” because it attracts tourists to the US and makes our exports more attractive overseas, but the weaker the dollar gets, the more it costs you and me to live. When incomes do not rise as much as the dollar drops, our standard of living goes down.

    At the moment, the dollar has gained significant strength against other currencies because of a global economic panic. But I see nothing to support the dollar’s long-term continuing strength. The government’s massive bailout packages and rescue plans will not work. It’s a fundamental rule of both reason and economics — the more dollars that are created, the less they are worth. One result: Foreign countries with sounder economies will accelerate purchases of big chunks of US businesses and premier properties for dimes on the dollar.

    Opportunities: At the moment, gold prices have softened, but I have not given up on gold, whose price has nearly doubled in the past five years. In fact, most of my assets are in gold, even though it is unpredictable. “Gold bugs” who invested in the 1970s didn’t make money for 20 years. My take: The game in these turbulent times isn’t to make a killing. It’s to preserve the wealth you have. Despite its recent weakness, gold generally tends to rise when the world is in crisis, and it usually moves inversely to the dollar, making it a doubly protective hedge in the next few years.

    Consider exchange-traded funds (ETFs), such as SPDR Gold Trust (GLD), recent share price: $70.65… and iShares COMEX Gold Trust (IAU), $69.12. I’m forecasting that the dollar will resume its slide and will drop in value by as much as 50% against other major currencies. That’s because the billions of dollars in bailouts and economic stimulus packages, along with low interest rates, will lead to hyperinflation. Under this scenario, your gold position could soar from its recent levels under $800 per ounce to $2,000 per ounce or higher. Conceivably, this could happen by the end of 2009. It’s not a get-rich-quick scheme, just a prudent way to invest in an era of radical currency fluctuations.

    TREND: DOWNSIZING

    “Bigger is better” has defined the American way of life since World War II, but our nation — humbled by its loss of global status and its shrinking middle class — will downsize fast. McMansions, gas-guzzling luxury cars and discretionary spending in excess of earnings will be derided. Concerned consumers, afraid of foods that are chemically treated, genetically engineered or imported from countries with lax standards, will increasingly demand locally grown, “microfarm” foods. Ubiquitous “big box” chains in malls across America will slow expansion and shut stores.

    Opportunities: Quality will replace supersizing as the key to success in the 21st century. In a depression climate, people with low incomes will buy only essentials. Many businesses that are unable to raise prices will be squeezed by low profit margins.

    By necessity and inclination, consumers with the means to buy nonessentials will want “better,” not more. As chain stores go broke, entrepreneurs can fill the gaps that the big guys leave behind. Success in the downtrend climate requires developing products and services that focus on well-thought-out, unique offerings that people can really use. Example: Reusable, recyclable, repairable products — anything that looks good, works well and saves energy. Consider investing in entrepreneurial firms that create these products.

    While population trends point to continued large influxes into big cities around the world, I believe that small towns and little cities will become increasingly popular places for people to move to, especially in retirement.

    Growing weary of long, expensive commutes, graying Americans and new generations who want to simplify their lives will seek old-fashioned communities within walking distance of places to shop and work. For example, I have invested heavily in my hometown of Kingston, New York (population: 22,828), which was the state capital during the Revolutionary War. I bought a historic building and turned it into a facility for my business. Other entrepreneurs can make similar moves. I don’t feel out of touch at all, because technology connects me effortlessly and efficiently with the broader world.

    TREND: CONSERVATION

    Until now, “green” practices, such as installing solar panels to provide energy for your house and turning your garbage into compost, seemed like good ideas but too much of an investment in money or time to be worthwhile for many people. This is changing because with high prices for energy, food and other things, people will find it increasingly worthwhile to become much more self-sufficient.

    Opportunities: Products and services that are conservation-related, from energy-efficient construction materials in houses to advice from consultants and books from authors who teach you how to “get off the grid.” If you or people close to you have expertise in this arena or the potential to learn about it — and you work in a threatened industry — consider going in this direction.

    TREND: HEAL THYSELF

    With 47 million Americans uninsured and health-care costs still rising, hi-tech diagnostic testing and drug and surgical intervention are unaffordable for many. This, combined with persistent reports of prescription drug risks, will lead to a revolt against our drug-dependent and invasive medical culture. Look for Americans to start taking much more responsibility for their own health and attaining health benefits through the integration of diverse therapies and better lifestyle choices.

    Opportunities: Practitioners of the healing arts — such as chiropractors, naturopaths, and anyone who can teach people how to get and stay healthy — will enjoy booming business. Entrepreneurs who provide simple but effective remedies or high-quality ingredients for these remedies will gain the greatest share of the expanding “Heal Yourself Health Care” market, perhaps the biggest growth industry of the next decade. Even people who have never considered a career in health care might consider this field.

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