YUPPIE SERENADE

  According to Austrian economics, the boom or speculative bubble bursts when the credit expansion ends. If a depression does indeed follow a credit boom, then Champagne Joe, the typical yuppie with borrowed money in the market and no savings faces a series of unpleasant events. Here's a possible scenario.

1. The markets fall and Joe gets a margin call. He must sell or come up with more money. The ensuing bear market wipes out his stock portfolio. The idea that stock ownership is the same as bank savings is put to rest forever.

2. The sudden market drop slows down the economy. Joe finds his stock options are worthless and the company he works for is cutting back. Either he or his wife may lose their job. Family income plummets.

3. Monthly payment on the home mortgage that was refinanced to 100% of value take a big bite out of family income. The value of Joe's home has now dropped far below the amount of the mortgage.

4. The price of all imports, including oil, soar upward in price because the dollar has fallen precipitously. Joe and his family can no longer afford to go shopping at the mall.

5. Interest rates go through the roof and Joe's variable mortgage floats upward. His house payment has become unmanageable. Joe struggles to pay off credit card debt. Borrowing costs are intolerably high, a new car or major purchase is out of the question.

6. Joe's company files bankruptcy. He takes a job elsewhere at half his prior salary.

7. Joe's home goes into foreclosure. He and his family move in with his sister.

8. Stocks continue to drop relentlessly. Joe's retirement is worthless. Now his family can only afford the bare essentials of life.

9. Joe's wife loses her job. She files for unemployment, but government revenues have shrunk dramatically and benefits are reduced.

10. Joe suffers from severe depression and spends his days watching the financial channels where a full-fledged panic unfolds in the stock and bond markets. Joe watches the dollar collapse and interest rates scream upward as liquidity vanishes.

11. Joe decides to file bankruptcy.

12. Joe turns to his parents for help. Joe's parents who had all their money with brokerage houses in money market funds and bond funds find they can't liquidate their holdings. Failure in commercial paper render money market funds illiquid. High yield (junk bonds) funds collapse and all holders are trapped, never to get a penny. Corparate bonds  funds face massive liquidations and plunging values. Joe'sparents are wiped out.

This isn't the worst of it. There's the potential for even greater failures, a total collapse that wipes out the wealth of America and leaves the public without help from any source. We are all at risk.

  To own gold you must have a sense of history. There always have been panics, crashes, hyperinflations, disasters and depressions. During these events, a majority of gullible citizens suffer unbearable losses. Our current extravagance has set us up for the greatest monetary losses in history. When the financial system locks up, the liquidity doesn’t exist for more than a few people to cash out painlessly. Gold insures against the stark punishment inherent in a financial earthquake. Whatever your reason for buying gold get at least 10 percent of your total net worth into gold coins. Then hold them in your physical possession in a home safe or bank box. Someday they should secure you and protect you against the forces of depression that will ravage the less insightful. In these high-flying days so remindful of the roaring 1920s (but many times more so), gold is a must.