The Worst is Still Yet to Come

The bad news about our nation's economic crisis is that we haven't begun even to smell, let alone see, the true impact of this nightmare. Even in its roller-coaster shifting, we still can't imagine where this financial tsunami will take us. People haven't begun to realize the losses they will suffer when this is finally over.

Today will be another bloodbath on the capital markets, and all signs indicate it will be another tough day for investors. Basically, the market hasn't come to the realization that the losses in the Collaterized Debt Obligation (CDO) market are in some cases two and three times larger than the principal invested.

Increasing debt limits to cover the principal is nowhere near solving this calamity; in fact, we're probably exacerbating it. The fundamentals of the credit market are currently being changed by government intervention. This epiphany may lead to another panic and huge sell-off in the equities market as well as the forced liquidation of commodity holdings.

They will need this immediate liquidation in order to receive more U.S. dollars necessary to pay for losses in the CDO market. This will lead to lower commodity prices, which would lead consumers into believing that the current inflation of our money supply is no longer a problem.

Once this trade begins to fully unwind, then history's greatest inflation of the money supply will have an even greater impact on Main Street. This will take at least months and probably years to come to fruition. But believe this: The die has been cast and the bloodletting has begun.