If you listen closely you can almost hear the hissing of a bubble deflating. But I'm not referring to either the housing or credit bubbles, though those are certainly losing air violently. My eyes are focused on a far bigger bubble, one that comprises the entire U.S. economy.

The problem with financial bubbles is that they can be very difficult to detect, especially for those trapped inside. The feeling of permanence can be so tangible and the newera psychology so alluring that even the normally pragmatic get swept away. Even as the air seeps out, they rarely notice the contraction until it's too late. By then they are soaking wet, and once they wipe the soap from their eyes, they finally see the light. However, clarity of vision in retrospect does little good for investors who had placed their faith in a bubble that was in fact a false paradigm.

The current economic slowdown is being dismissed as the sort of cyclical decline that the American economy has shrugged off numerous times over the past generation and a half. Unfortunately, we will not be so fortunate this time around. It is in fact the beginning of the economic collapse that I foretold early last year in my first book, Crash Proof: How to Profit from the Coming Economic Collapse (John Wiley & Sons, 2007). Although many of the book's predictions were considered paranoid at the time, the collapse I envisioned is now well under way. The pace of change is slower than I imagined, but the script is playing out pretty ...

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