And it really helps that the FDIC has raised its banking insurance coverage to $250,000 worth of deposits in an individual account.

However, in a bank holiday, a broad-based banking crisis, we may see some of the rules bend or break.

If the FDIC is overwhelmed by the number of failures, or if the banks are shut down by Federal order, you may have to wait a while before you can access your funds. That's why it's important to have a stash of cash that is not in the bank.

And importantly, even in the best of times, do not count on the government to cover uninsured bank deposits, debentures, or other bank obligations.

For the latest list of the weakest and strongest banks in the United States, visit www.moneyandmarkets.com/banks.

The fates of empires are often sealed by s...o...b..lling debts, compounded by expensive wars. We saw it happen to the Soviet Union and to the British Empire before them. If the United States continues on the road it is on now, it may very well happen to us.

Heck, we're seeing major banks fail week after week-a parade of pain down Wall Street. That's not supposed to happen in the United States! It hasn't happened for decades, and it may be a prelude to the worst hard times to hit this country in generations.

How Bad Could It Get? Pretty Bad!

I once heard a story told by a 90-year-old man who lived through the Great Depression. He was from a large farming family. During the Depression they couldn't feed all the kids so the older boys drew straws to see who would leave the farm.

He and another brother drew short straws and left the next morning with a loaf of bread each. He slept in culverts and nearly starved to death (he started to cry as he recalled a woman who saw he was hungry and gave him cornbread), but he kept walking because to go back would only add to his family's almost unendurable hardship.

He walked more than 80 miles before he found a farmer who took him in to milk a herd of cows. He worked for two years for room and food and one pair of coveralls.

Now, looking around at the financial sinkhole our country is in, this man said: "Things are going to be worse in our future than anything I've lived through."

Wall Street is just waking up to the bad times. Main Street's hard times started seven or eight years ago. You can see it in the faces of mothers as they cut back on grocery purchases, people whose dream homes are sliding into foreclosure, and owners of small businesses who have to fire their longtime workers, who are often their friends as well, as business dries up in a withering economic climate.

I don't know if we're going to have a depression, or even a severe recession. It depends on if Washington can save Wall Street 's bacon. I do know that a recessionary environment is usually deflationary. But gold can hold its value quite well because investors are scared to the point of panic.

And no government is going to sit around and let deflation strangle a nation. An easy way out is to start printing money, and that's highly inflationary!

I hope that Washington can fix the problem. But there's a real possibility they can't.

And if we see a Great Depression II, just remember that the sequel is usually worse than the original.

New Careers for a Brave New World

Even if the economy and/or society collapses, you'll still have to earn a living. You may know some skills now that you can translate into a vocation for the future. Some tips would be to:* Think simple * Think necessities * Think stress Everyone is going to be stressed after a collapse. As long as you're willing to take at least part of your payments in alternative currencies, you might be able to make a good living thinking outside the box on how you can relieve stress from other people's lives.

Here are some ideas on new careers:* Bike mechanic. If we have an energy crisis, bikes are going to become a lot more popular, as will people who can fix them.

* Seamstress/Tailor. People won't have money for new clothes and will probably line up to have them repaired on the cheap.

* Cobbler. The shoes Americans wear today are made to wear out in a matter of months. Resoling shoes-with rubber cut from old tires or other materials-could be a booming business * Making beer. There's that relieving stress angle. If the government goes away, you might want to be the guy who already knows how to make beer at home. If the government is still around, making a lot of beer could be legally dubious.

* Acoustic musician. When was the last time anyone had to live without iTunes? Playing music can score a bed and a meal for a traveler trying to get from one place to another.

* Tool maker. If you have the equipment-a mini-mill, and the power to run it-you might be able to write your own ticket.

These are just examples. We don't know exactly what crises will strike, so we don't know what kind of world will be coming. I think it's very likely that one part of the population sinks into desperate poverty while another part continues on just fine, oblivious. In that case, private security will probably be a booming profession.

The point is, you have to be flexible, willing to adapt (to go from, say, being a journalist to being a pool cleaner), and remember that you can't eat pride. If you don't have any secondary skills, skills that can be done in the absence of electricity, now would be a great time to learn how to do something new.

Having a new skill is cool. You'll be showing it off to all your friends. Stocking up on necessities (potential barter items) has very few downsides. If disaster never comes, then you'll have learned some new skills, and stocked up on necessities, which ultimately saves you money.

The Least You Can Do * Pay one extra mortgage payment a year-but don't pay off your whole mortgage if you have other uses for the money.

* Pay off credit-card debt and other high-interest debt as fast as possible.

* Get your 401(k) in order.

CHAPTER 4.

Gold, Hard a.s.sets, and Alternative Currencies Give me control over a nation's currency and I care not who makes its laws.

-Baron M.A. Rothschild In this chapter, I 'll tell you why I believe gold and silver are great places to put some of your money. I 'll give you reasons why the long-term trend in gold and silver should be higher, and the dos and don'ts of bullion buying. I'll also talk about foreign currencies as a potential investment, and alternatives to cash currencies that we could be using if the economy really goes belly up.

With the stock market's tumultuous ups and downs, many people are getting the feeling that gold, guns, and Spam are much better investments. Gold and silver, precious metals, have long been the standbys of survivalists and people who don't hold out much hope for the U.S. dollar or other investments. Gold will always be worth something 20 years from now no matter what the economy is like-you can't say the same for any stock. But cash still has its place, even though we may eventually experience a currency meltdown.

That said, there's something you have to realize, and it's best understood when looking at a U.S. one-dollar bill. Go ahead and take one out-I'll wait.

You see that picture of George Washington on the front? He knows what a nightmare a fiat currency can be. The paper currency (Continental dollar) issued by the Continental Congress declined in value by 97% in three years. Runaway inflation and the collapse of the Continental dollar prompted delegates to the Const.i.tutional Convention to include the gold and silver clause in Article 1 of the United States Const.i.tution. I'm pretty sure Washington would say hard experience shows it is ludicrous for a government could print as much paper money as it felt like with nothing to back it up but promises and confidence. Today, it is only due to agreements worked out between shadowy and powerful men that a dollar is worth anything at all.

The Eternal Store of Value

Gold has enjoyed a great run over the past few years, but it hasn 't been a straight path. There have been enough dips and outright plunges to make gold traders feel like they're riding the Devil's own roller coaster.

On the other hand, gold is doing a lot better than the broad commodity indices, and certainly a heck of a lot better than domestic or international stocks.

"The real dynamic in gold right now is fear," according to Charles Nedoss, Senior Account Manager at Peak Trading in Chicago. "Gold is a proxy for fear. Gold is the vehicle that people use as a hedge against the volatility in currencies and other markets."

Why is that? It's simple. Gold is the hardest of hard a.s.sets. And as paper a.s.sets go up in smoke-a trillion dollars in stock market equity disappearing overnight, and trillions more in arcane debt instruments not worth the paper they're printed on-gold starts to look better and better.

The new rush into gold isn't taking place in a vacuum. It's happening in the context of a meltdown in the global credit markets, ma.s.sive shifts in the global economy, and the declining value of the money in your wallet.

So, again, do I think it's a good time to own gold? I think it's a great time to own gold. I don't know if the manure is about to hit the fan, but if it is, gold is a nice hedge to have.

Of course, gold doesn't have to go higher. I think its long-term trend is up but in the shorter term, it could go lower due to the tremendous stress on the global economy.

What Can Drive Gold Lower in the Short Term?

I don't know if we're going to have a depression, or even a severe recession. It depends on if Washington can save Wall Street's bacon. I do know that a severe recession is usually deflationary. But gold can hold its value quite well because investors are scared to the point of panic. In fact, a financial panic is the kind of environment where investors and ordinary citizens snap up gold bullion and coins by the fistful.

At the same time, we can have steep corrections because investors the world over are simply terrified that we are facing a severe global recession, along with deflation. While I wouldn't be surprised to see deflation in the short term, especially since the credit market has frozen up, I think longer term we're going to see strong inflation.

Sure, we have economic weakness, but at the same time, the United States is paying for a war that is ruinously expensive in both blood and money. In many ways, it's a repeat of what we had in the 1970s. If you'll refer to Figure 4.1, you can see I've charted the year-over-year change in inflation with gray areas showing U.S. recessions. On top of that, I've added the U.S. gold price.

You can see that in the 1970s, the United States went into recession, yet inflation kept going higher, and so did the price of gold. Now, more recently, inflation was red- hot, and gold went higher.

Figure 4.1 Consumer Price Index for Urban Consumers Source: St. Louis Fed.

Meanwhile, the U.S. government is pouring liquidity into the market in an attempt to break the corporate credit logjam and keep the economy from stalling. Eventually, that logjam will break and liquidity will flood into the system.

Here's what I think:* It is not too late to profit from rising gold prices-not by a long shot.

* You will want to have gold and the right gold stocks in your portfolio.

* Gold could move farther and faster than many people on Wall Street believe possible.

Five Forces That Will Push Gold Prices Higher

There are many forces lining up to push gold higher. Let 's look at just five of them:1. Lack of new supply 2. Gold ETFs 3. A flood of red ink in Washington 4. Central banks 5. The rise in China's gold reserves Any one of these forces is bullish for the yellow metal-together, they could send gold smashing through overhead resistance to soar.

Force #1: Lack of New Supply

Gold comes from a bunch of sources-mines are just one of them. There's also central bank selling and sales of gold sc.r.a.p. Another source is hedging, or forward selling of gold production by miners, which isdifferent from regular production in that it locks in future sales of mine production at a set price and helps price stability.

However, mines are the source of new gold supply. And despite higher and higher prices, gold mine output fell in 2008 to a 12-year low! (See Figure 4.2.) Looking ahead, GFMS consultancy-a London-based research group that serves gold mining companies and supplies the World Gold Council with its data-says that gold production will fall again this year.

Figure 4.2 Gold Mine Production Sources: GFMS, World Gold Council.

And the production decline certainly isn't due to lower prices. Prices more than tripled from $271 an ounce in 2001 to touch $1,000 an ounce in 2008 and again in 2009.

The easy gold has been dug up. New projects can take as long as 10 years to bring on line, compared with just three to five years in the past.

Why is this happening, with gold prices so high? The easy gold has been found; that's why. Many new deposits are smaller and lower-grade, and not worth investigating after the initial find.

In 2001, the production costs of gold were roughly $160 per ounce as prices dipped to $270. Then in early-2008, production costs rose to $400 to $500 an ounce as prices briefly hit $1,000.

Companies were ramping up exploration budgets-right up until 2008, when the global economy ran off the rails.

Industry nonferrous (non-iron) metal exploration spending budgeted for 2008 was in the vicinity of $13.2 billion, according to Nova Scotia-based Metals Economics Group. That was a 26% increase over 2007, and the sixth consecutive yearly increase since 2002.

But then the bottom fell out of the market. Difficulties in raising financing-including an outright disappearance of credit for junior miners-and ballooning capital costs forced many projects to be delayed, and others outright canceled. Even big miners like Rio Tinto and Freeport McMoRan Copper & Gold slashed explorations budgets.

This puts a serious kink in the supply chain of projects coming online, and means there will be less gold coming out of mines in the future.

Another reason why production isn't ramping up with gold prices is there are fewer mining companies. The 20-year bear market in gold forced many marginal mines to close. And over the past 15 years, a wave of mergers has created a bunch of mega-sized gold miners. While the top five each produce between 3.5 and 7 million ounces out of the ground every year, they're likely to concentrate more on working their existing mines and buying up other mines, and focus less on new exploration.

Force #2: Gold ETFs Can Boost Demand