If you thought the financial crisis of 2008 was bad, get ready for real collapse. The world – partially driven by America’s Keynesian failures – is propping itself up on debt. The United States, already $12 trillion in debt, still has some $100 trillion in unfunded liabilities for social security and medicare (money it WILL owe), and the baby boomer generation is getting ready to retire.

If that doesn’t spell disaster to you, you probably went to public school.

“What, Dan? Didn’t the economy already collapse last year?”

Not really. Our problems – huge debt, the probability of massive inflation, insane , out-of-control government spending – are still here.

Listen to Ron Paul, who’s writing that there are parallels between the false recovery we’re seeing now and 1930, when people believed they were recovering:

A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.

“Oh, Dan, you’re just a pessimist.”

Is it pessimistic to look at weather conditions favorable for a tornado and say “Hey, there might be a tornado coming”? That’s just called forecasting.

Or, at the very least, it’s cautious planning. One of the big financial companies in Europe, Société Générale, is already preparing its clients for a “global collapse,” saying that it’s not a forecast, but preparation for the worst-case scenario.

Funny. Why would they bring this up unless there’s something to this “we can’t sustain the path we’re on” theory?

Let’s get a little more detailed.

America, Without Drastic Action, is Economically Doomed

The baby boomer generation – generally referring to the generation after the World War II generation – is huge, and they’re getting ready to retire. Add that to what is essentially a welfare state in America, where Social Security and Medicare dominate the domestic spending, and you can see where I’m going with this.

According to the National Center for Policy Analysis (citing the Congressional Budget Office), by the year 2050, Social Security and Medicare/Medicaide will consume basically the entire federal budget.

Take a look at the coming jump in which Social Security and Medicare will eat up the money we get from income taxes:

If that doesn’t sound like a big deal, consider where America will get its receipts in 2010:

• $1.061 trillion – Individual income taxes
• $940 billion – Social Security and other payroll tax
• $222 billion – Corporation income taxes

Hey, remember that “storm” metaphor I threw out there? I’m not the first. Back in 2005, USA Today ran a story called “A ‘fiscal hurricane’ on the horizon,” in which the comptroller general of the U.S., David Walker, dropped the real on us. Bold added:

“To hear Walker, the nation’s top auditor, tell it, the United States can be likened to Rome before the fall of the empire. Its financial condition is “worse than advertised,” he says. It has a “broken business model.” It faces deficits in its budget, its balance of payments, its savings — and its leadership.

Walker’s not the only one saying it. As Congress and the White House struggle to trim up to $50 billion from the federal budget over five years — just 3% of the $1.6 trillion in deficits projected for that period — budget experts say the nation soon could face its worst fiscal crisis since at least 1983, when Social Security bordered on bankruptcy.

Without major spending cuts, tax increases or both, the national debt will grow more than $3 trillion through 2010, to $11.2 trillion — nearly $38,000 for every man, woman and child. The interest alone would cost $561 billion in 2010, the same as the Pentagon.”

Tell me – does that sound like a recipe for sunshine and rainbows? Oh, and did you notice that the estimates back then for the U.S. debt were under-estimated?

If you’ve read my post about the fall of the Roman Empire, you’ve seen this before.

The Romans inflated their money. The Denarius started out as a silver coin, but was only 5% silver by the third century A.D.

At least the Romans had money in their money! The U.S. dollar is just a piece of paper that says “this is worth a U.S. dollar.” They’re like Schrute Bucks. It isn’t backed by gold or silver; it’s just backed by the word of the U.S. government. This gives the U.S. – more specifically, the Federal Reserve – the power to print as much money as they want. The more money you print, the less it’s worth. (Read more about the looming collapse of the dollar here: http://www.dollarcollapse.com/faq/)

Okay, I Get It, Peter Schiff. So What’s Going To Happen?

I highly doubt that America is going to fall off the face of the Earth any time soon. Ancient Rome only officially fell hundreds of years after it had torn itself apart from the inside. Also, with the degree to which countries like China are tied to the American economy, an American economic collapse would harm the rest of the world, as well. That’s probably why you see Chinese officials making fun of the way we handle money, but still reluctantly buying our treasury bonds.

So what IS going to happen? Here are a few scenarios.

1. We enter into the Great Depression II, but since it also adversely effects other countries, basically everyone suffers for it. This might sound not so bad, but remember what happened after the last Great Depression.
2. The American economy collapses and we fall behind, becoming a G-8/G-20 nation like Russia, post-U.S.S.R.
3. America’s collapse doesn’t occur until way later, at which point divisions across the country mean the Union dissolves; Texas becomes a country, for example.

The more likely scenarios, I think, are 1 and 2. All three, of course, are very bad. Previous economic collapses didn’t help us learn to keep the government and central banks out of the economy’s business, and the 2008 crisis certainly didn’t teach us that, so why should we assume it would in the future? Of course, that is the exact lesson we’d need to learn to keep America strong for the long-term.

Whatever happens, I think we do know that there are some things that seem destined to happen.

• Massive inflation, or “hyperinflation” and the subsequent skyrocketing in the prices of commodities like gold
• Huge tax increases; my children will probably see more than half of their income taken away
• Asian markets emerge to elite power and influence, including China and India
• Increased federal government control in order to enforce higher taxes and other regulations
• Weakened dollar forces many international forces to abandon dollar as unit of measurement
• If things get bad, the FDIC could collapse and bank withdrawals blocked – it happened in Argentina when inflation struck

So What Can I Do?

I won’t get into the doomsday scenarios mentioned in Neil Strauss’ Emergency, which I own, but here is what I think you should do to be ready for America’s gloomy economic future.

1. Buy gold and silver to hedge against inflation. If you have $1,000 in cash sitting under your bed, it actually becomes less valuable because of inflation. Gold and silver, on the other hand, generally approve in price as inflation increases. China has been buying up gold and you should, too.
2. Diversification. If you live in the U.S., keep all of your money in the U.S., and see U.S. officials freeze your assets, then you have no money.
3. Have emergency funds. Funds in what type of currency? All sorts. You might even want some U.S. dollars, believe it or not, just in case the U.S. government ever puts a freeze on bank withdrawals. In a real disaster scenario, some people believe that cigarettes will work as currency.
4. Own things worth trading – including skills. As is advised in eHow’s guide to surviving total economic collapse, you can always survive economic hardship if you have things of real value and you know how to barter. One thing you can always barter are useful skills, but if you own assets that have real value, you can barter those into useful currency, as well.
5. Check out where your current investments are. If the world’s main markets go to bleep, will you be one of the people screaming to sell? Don’t be.
6. Prepare for the worst. Take survival classes, build up survival kits and stores, and be ready for apocalyptic scenarios. Better safe than sorry. Will this make you “weird”? Yes. Better weird than sorry, too.

Ultimately, the two most important things are being aware that a potential disaster can happen and actually taking action to do something about it. How many times have you heard “buy gold,” and believe that it’s a good idea, and how many times have you actually taken proactive steps to buy gold?

Should the economy collapse and people panic, will you be one of the ones panicking, or will you be more comfortable, knowing that you prepared for it?