We are uncomfortably close to the beginning of the great worldwide financial panic of 2008. You had better buckle your seat belt, put on your crash helmet, and get ready for a bumpy, and for many, very unpleasant ride.

“We are going to see economic times the likes of which no living person has seen,” Trends Research Institute Director Gerald Celente said, forecasting a “Panic of 2008.”

“The bigger they are, the harder they’ll fall,” Celente said in an interview with New York’s Hudson Valley Business Journal.

Celente, who correctly forecast the subprime mortgage financial crisis and the dollar’s decline a year ago and gold’s current rise in May, told the newspaper that the subprime mortgage meltdown was just the first “small, high-risk segment of the market” to collapse.

Derivative dealers, hedge funds, buyout firms and other market players will also unravel, he said. The derivative market alone is a multi trillion dollar market that is so large no one, even the big banks up to their necks in it, knows just how big it is.

Then you have more mundane credit markets, like student loans, auto loans, and credit card debt that are showing signs of coming unhinged. It is highly likely that more than one big name bank and investment bank will not survive the panic of 2008.

Celente makes another chilling forecast. The US dollar will collapse and lose 90% of its value. Should that doomsday forecast turn out to be true we Americans are going to suffer as never before.

However, the interesting thing about financial disasters is that a few brave independent thinking and perhaps lucky people manage to become filthy rich. When markets collapse the events surrounding the collapse happen so fast that those who are short markets or who are holding put positions make obscene sums of money while almost everyone else is getting creamed.

Isn’t hard knock capitalism wonderful? That is if you are wise enough and disciplined enough to not listen to the talking heads and the majority of the stockbrokers and financial newsletter publishers who are always encouraging you to buy “cheap” stocks that become ever cheaper.

Those who are capable of making independent decisions and get on the right side of the markets in the panic of 2008 will do very well for themselves. But as a nation the standard of living for many Americans will decline, perhaps for many years.

The 75 basis points cut in the discount and federal funds rate yesterday along with better than expected earnings from Goldman Sacs and Lehman brought the bulls back in force. The market rose 420 points, its’ best performance in over five years.

However, keep in mind that in bear markets you have from time to time very sharp rallies. The problem is they don’t last very long. Don’t forget to sell the rally.

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!