New Roth IRA Edge For The Wealthy

New Roth IRA Edge For The Wealthy

By DONALD JAY KORN, FOR INVESTOR'S BUSINESS DAILYPosted 01/08/2010 06:40 PM ET

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Roth IRAs can be a sweet deal. If you've invested wisely so that you expect your income tax rate to rise in the future, including retirement, a Roth typically hands you more after-tax money than a traditional IRA.

But high-income taxpayers face hurdles with Roths. A key one: You can't make Roth contributions — or deduct traditional IRA contributions — if your income is over certain amounts.

Still, there are legal ways to get around those limits, thanks to a new tax rule. Now, anyone with a traditional IRA can convert that account to a Roth IRA.

You'll have to pay ordinary income tax on any amount you convert that got tax-deferred treatment. But you'll be eligible for Roth IRA benefits, such as completely tax-free withdrawals after five years and after age 59 1/2. And, depending on your future tax rate, you could end up with more after-tax money.

Up to this year, such conversions were available only to those with modified adjusted gross income (MAGI) of $100,000 or less.

Anyone with earned income, and workers' spouses, can make a nondeductible contribution to a traditional IRA. In fact, you now can contribute for 2009 and 2010.

Then you can convert your traditional IRA to a Roth IRA.

You can contribute to a traditional IRA for 2009 up to April 15. You also can contribute to a traditional IRA for 2010, now that it's a new year.

Workers and their spouses can contribute up to $5,000 each year to their IRAs. Those 50 or older can contribute up to $6,000.

So a hypothetical John and Mary Smith, both age 51, could kick in as much as $24,000 by next April 15. That can be put into traditional or Roth IRAs, or a combination.

That's important because of restrictions on who has a legal green light to contribute to a Roth IRA.

Single taxpayers have the OK if their MAGI is $120,000 or less in 2009 or 2010. The MAGI ceiling for couples filing jointly is $176,000 in 2009 and $177,000 this year.

Workers covered by an employer's retirement plan can deduct their contributions to a traditional IRA for 2009 if their MAGI is $65,000 or less (single) or $109,000 (joint).

For 2010, the ceiling for singles goes up to $66,000.

Spouses of covered workers can't deduct traditional IRA contributions if their joint MAGI was over $176,000 last year or is over $177,000 this year.

Legal Loophole

So you are shut out from Roth IRA contributions and from traditional IRA deductions if your income tops the limits described above.

But you can make a nondeductible contribution to a traditional IRA, up to the $5,000 or $6,000 limit for each year, regardless of income.

Then you can convert the balance to a Roth IRA. You'll wind up with the benefits of a Roth IRA.

You can withdraw the money you converted at any time, tax-free. After five years and after age 59 1/2, your investment earnings also qualify for tax-free withdrawals.

And you'll never have to take any required minimum withdrawals from your Roth IRA.

The money can keep growing tax-free, potentially for years or decades.

"Your beneficiaries could wind up with a bigger after-tax windfall than they'd get from inheriting a traditional taxable IRA," said Ed Slott, who publishes the IRA Advisor newsletter. They'd pay no tax on it.

If you make a nondeductible contribution to a traditional IRA and convert to a Roth IRA, you set the stage for tax-free investment earnings, for yourself or your beneficiaries.

Suppose you contribute $12,000 of after-tax dollars to a traditional IRA for 2009 and 2010.

Then this year you convert to a Roth IRA when your account balance is still $12,000. Those are all after-tax dollars so you won't owe any income tax on the conversion.

But suppose you make $12,000 of nondeductible contributions. They grow to $15,000 in your traditional IRA. Can you convert just the $12,000 of after-tax dollars, tax-free?

No. Every Roth IRA conversion is taxed in proportion to the pretax money in all of your traditional IRAs. That's the case even if nondeductible contributions are in just, say, one of several IRAs.

If you have $15,000 in traditional IRAs, including $12,000 of nondeductible contributions, the after-tax money is 80% of the total.

If you convert the $15,000 to a Roth IRA, you'll owe tax on $3,000, 20% of the total.

Figuring Your Tax

Suppose you convert only $12,000 to a Roth IRA and leave $3,000 in the traditional IRA.

You'll have $2,400 of taxable income, 20% of the $12,000.

The same holds if you already have a traditional IRA and make nondeductible contributions. Suppose you have $88,000 in a traditional IRA now. All that money is pretax.

You contribute $12,000 of after-tax money for 2009 and 2010. Now you have a total of $100,000. So 88% of the conversion is taxable.

Obama's Green Jobs Do Harm - Not Good!

Obama’s Green Jobs Plan Will Do More Harm Than Good

• Posted January 8th, 2010 at 4.14pm in Energy and Environment.

On the campaign trail Barack Obama promised if he were elected president, he wouldcreate 5 million “green collar” jobs. Today President Obama announced $2.3 billion in tax credits for a clean energy economy will ostensibly create 17,000 jobs. “Building a robust clean energy sector is how we will create the jobs of the future,” he said in a speech this afternoon.

Make no mistake; this government-run plan will kill more jobs than it aims to create.

There are a number of serious problems with the goal to create green jobs, and Europe’s unfavorable results with renewable energy should raise red flags in the United States. And cap and trade, which is sold by President Obama, Nancy Pelosi, among others as the ultimate jobs bill, is in reality the ultimate jobs destroyer.

Less Bang for your Buck: Sure, the government can create jobs. They can use our taxpayer dollars to hire workers to dig holes and fill them back up. But if there’s no net gain in productivity and wealth, the job is a waste. For instance, we could replace all of the world’s mechanized agriculture equipment with hoe wielding farmers, and that would create jobs. But it would also significantly reduce productivity and efficiency. The economic reasoning for switching from more efficient machinery to less efficient human capital is such a baseless plan any politician suggesting it would be laughed out of office.

Yet that is the exact premise of the green jobs boondoggle. The government wants to mandate and subsidize labor intensive, inefficient, and expensive power sources. But the problem is that if it takes more labor and capital to produce renewable energy, there is a net cost to the economy. Proponents of wind and solar argue this is a good thing. Apparently they forgot the there’s-no-free-lunch-lesson you learn in Economics 101. Government spending will create some jobs to build windmills and solar panels and work at biomass plants but this diverts labor, capital and materials from the private sector that could be used more efficiently to create even more jobs. In effect, government subsidized green jobs destroy jobs elsewhere.

Cap and trade, while not part of the green stimulus, is being marketed as such. Because of higher energy prices, some jobs will be destroyed completely while others will move overseas where carbon capping isn’t in their country’s agenda and therefore the cost of production is cheaper. The Heritage Foundation’s Center for Data Analysis found that, for the average year over the 2012-2035 timeline, job losses will be 1.1 million greater than without a cap and trade bill. By 2035, there is a projected 2.5 million fewer jobs.

Green Stimulus Already Failing: Thus far, the effort to create or save jobs with a green initiative hasn’t been very successful. In Baltimore, for instance, stimulus dollars have been spent to patch roads, install newer furnaces and painting rooftops white to conserve energy. According to the Washington Post’s Alec MacGillis, none of these projects, as well as others, have created a single job. Another example is in the state of Indiana, where companieshave “weatherized 82 homes out of its three-year goal of 25,000, and reported zero new jobs from the spending.”

Learning from Europe’s Mistakes: A research institute located in Germany recently released a study on the economic impacts of that country’s green energy initiative. Commissioned by the Institute for Energy Research (IER), the report finds with per worker subsidies for solar industry jobs are as high as $240,000.

Spain is a country President Obama says the U.S. should replicate when it comes to energy policy, saying, “they’re making real investments in renewable energy.” But real investments aren’t necessarily good investments. Another IER-commissioned study coming out of King Juan Carlos University in Madrid by Gabriel Calzada found that, for every green job created, 2.2 jobs in other sectors have been destroyed. Furthermore, Spain’s government spent$758,471 to create each green job and used $36 billion in taxpayer money to invest in wind, solar, and mini-hydro from 2000-2008. The country’s unemployment rate is currently at 19.4%.

The economically rational way to create jobs and expand green energy is to allow them to compete freely in the market, end dependence on the government, and eliminate regulatory barriers to entry. Like all energy sources, green energy should be able to live or die on its own two feet.

In time and with the proper policies in place, renewable energy might be inexpensive and efficient. If the private sector can create wealth by hiring green laborers for renewable energy projects (absent federal handouts), it will do so. The U.S. Chamber of Commerce’s “Project No Project” lists all the renewable energy plans not moving forward and the groups that are opposing them. The NIMBY, regulatory litigation problems make it difficult, not just for renewable sources, but all sources of energy stifle real job creation and economic growth. To fix this Congress and the administration should:

1.) Peel back regulations. Reduce the unnecessary regulatory red tape that holds up renewable energy ventures and makes them prohibitively more expensive and deters investment. Establishing regulatory certainty would allow businesses to plan financing for the future rather than to be hit unexpectedly with unforeseen costs.
2.) End energy subsidies. Subsidies create complacency within the industry and direct money that could be used more efficiently elsewhere. The private sector investment in energy research is actually larger than many might think. True breakthroughs in energy technology take time but the private sector has been generating marginal improvements in efficiency for decades.
3.) Limit Litigation. Creating a manageable timeframe for groups or individuals contesting energy plans would avert potentially cost-effective ventures from being tied up for years in lawsuits.

We’ve heard the green jobs rhetoric before and we’ll likely hear it again, but that doesn’t make it a good idea. It’s a profoundly wasteful use of taxpayer’s money and will do much more to hurt the economic recovery than to help it.

U.S. Government Can't Deal With Terrorism

A Failed Anti-Terror Strategy – by Jamie Glazov

Posted By Jamie Glazov On January 4, 2010

Robert Spencer is a scholar of Islamic history, theology, and law and the director of Jihad Watch ^[1]. He is the author of ten books, eleven monographs, and hundreds of articles about jihad and Islamic terrorism, including the New York Times Bestsellers The Politically Incorrect Guide to Islam (and the Crusades) ^[2] and The Truth About Muhammad ^[3]. His latest book, The Complete Infidel’s Guide to the Koran ^[4], is available now from Regnery Publishing, and he is coauthor (with Pamela Geller) of the forthcoming book The Post-American Presidency: The Obama Administration’s War on America (Simon and Schuster).

FP: Robert Spencer, welcome to Frontpage Interview.

What do you see as the key lessons of the failed terror attempt on Northwest Flight 253?

Spencer: The chief lesson of the attempted jihad attack on Flight 253 from Amsterdam to Detroit on Christmas Day is that our entire anti-terror strategy is a huge and abject failure. Flight 253 revealed a massive failure not only of airline security procedures, but also of the larger strategy that America and the West has been pursuing against jihad terrorism.

As for airline security procedures, Abdulmutallab was able to get on the airplane without a passport, and with ingredients for an explosive that would have destroyed the plane and killed everyone in it.

TSA officials are busy tightening security procedures with new Abdulmutallab-inspired rules such as forcing passengers to stay in their seats for the last hour of the flight, but these new measures will do nothing to prevent another attack. One thing we have seen over the years since 9/11 is that airport security is always one step behind the jihadists: after jihadist Richard Reid attempted to set off a bomb hidden in his shoes, we all have to take off our shoes and send them through security scanners.

After a group of jihadists tried to sneak onto planes explosive chemicals hidden in drink bottles, we can’t carry drinks through airport security terminals. Because Abdulmutallab attempted his jihad attack just before the plane landed, now we can’t get up during the last hour of the flight.

The one thing that the TSA should have learned, but hasn’t, is that next time the jihadists will do something else, not just repeat what they did before. And even if every passenger were given a full body cavity search, they will find some way to get around it.

But attempt a new approach based on sensible profiling? The TSA would rather fold up shop altogether.

FP: Liberals love to portray Islamic terror (this is when they are forced to even admit it exists) as the result of American capitalism and imperialism and how it has subjected poor people into misery. But Abdul Mutallab doesn’t fall into this narrative very neatly. Maybe it has something to do with some stuff he was reading while he was enjoying material wealth, personal comfort and relaxation thanks to capitalism?

Spencer: They constantly ignore the possibility that the jihadis might not always be reacting to things America has done, but may hate us for reasons of their own, independent of our actions. Umar Farouk Abdulmutallab was a classic recipient of Western largesse designed to win over the loyalties of Muslims – he was educated at the British International School in Lome, Togo. Yet contact with solicitous and friendly non-Muslim Westerners obviously did nothing to quell his jihadist fervor. And the son of a rich man (who notified American authorities about his jihadist sentiments, to no avail), Abdulmutallab once again proves false the idea that poverty causes terrorism. The myriad aid programs that are based on this false assumption have done nothing to stop or even slow jihad terrorism, and they never will.

Abdulmutallab was, in all likelihood, “radicalized” not by Western oppression but by the teachings of the Qur’an and Sunnah. All the concerted efforts by the State Department and DHS to ignore the jihad doctrine and reach out to people they deemed to be “moderate Muslims” have likewise not worked.

According to the Nigerian newspaper This Day, when Abdulmutallab was at the British International School, “he was known for preaching about Islam to his schoolmates and he was popularly called ‘Alfa,’ a local coinage for Islamic scholar.” This illustrates yet again that, contrary to the popular view, Islamic jihadists present themselves among their fellow Muslims as the exponents of authentic Islam, making their case from the Qur’an and Sunnah — and those Muslims who oppose jihadist violence and Islamic supremacism have never successfully refuted their arguments.

Outreach to moderate Muslims has not aided in this effort, and has deceived the general public into thinking that the influence of peaceful Muslims over jihadists is much larger than it actually is.

FP: Your thoughts on Obama and Napolitano in terms of how they are handling this this attempted terror attack?

Spencer: Napolitano’s initial statement that “the system worked” was incredible, and Obama’s slowness to respond and failure to break off his vacation inexcusable — as was his later reference to this apparent Al-Qaeda operative as an “isolated extremist.” Their abysmal failure to come to grips with the jihad doctrine has left us vulnerable to attacks from quarters they consider safe, as Abdulmutallab himself illustrates: as a rich man’s well educated son, he fits none of the conventional non-Islamic explanations for jihad violence that prevail among government and media analysts. He should be the cause of a wholesale reevaluation of our policies and procedures. But that isn’t going to happen.

FP: What we need is profiling, yes? And our culture won’t allow. Tell us the psychology here that leaves us tragically vulnerable.

Spencer: We have, as a culture, been sold a bill of goods by leftist ideologues who have convinced us that to make a realistic appraisal of the source of a threat and to react accordingly would constitute “racism” and “bigotry.”

Islamic terrorists are generally not grandmothers from middle America — why should everyone be subjected to increasingly annoying and futile airline security procedures when we know what group is committing these attacks, but just don’t want to admit it?

Profiling is flawed and will not be a perfect solution, as there is no common racial or any other characteristic that the jihadis share. But a sensibly educated TSA would be able to spot people who might constitute a greater risk, and respond accordingly.

Unfortunately, no matter how many young Muslim men blow things up or try to do so, we cannot even have this conversation as a nation, because the race wolf-criers have completely dominated the field.

FP: Concluding thoughts? What concerns you the most in what you see happening? What are the grave consequences if we don’t get it right?

Spencer: One thing is certain, Jamie: nothing we are doing now will make a recurrence of the Flight 253 incident any less likely. New security methods are needed, as are new strategies to combat the global jihad. But instead, we just keep reapplying the same old failed policies. And they will continue to fail, because of a continuing failure to evaluate realistically the situation we’re in.

FP: Robert Spencer, thank you for joining Frontpage Interview.

Obama Not Serious About Terrorist Threat

Frontpage Interview’s guest today (2009-12-31) is Victor Davis Hanson, a classicist and historian at Stanford University’s Hoover Institution. He is a columnist for National Review and a recipient of the 2007 National Humanities Medal.

FP: Victor Davis Hanson, welcome to Frontpage Interview.

First things first, let me ask you this.

If our government was serious about fighting Islamic terrorism and saving lives, wouldn’t Abdul Mutallab be getting water-boarded just about now?

We know that the use of “enhanced techniques” of interrogation on al-Qaeda leader Khalid Sheik Mohammed – which included waterboarding – forced KSM to give up crucial information that ended up preventing countless terrorist attacks and saving an infinite amount of innocent lives. It allowed, for instance, the U.S. to capture key al- Qaeda terrorists and to thwart a planned 9/11-style attack on Los Angeles.

But now, thanks to the Obama administration and its approach to the terror war, Abdul Mutallab will probably be getting a lawyer and not have to say anything. This, naturally, drastically increases, rather than minimizes, the possibilities of a future terror attack on our soil and against our citizens.

Your thoughts?

Hanson: I don’t think right now the question is over interrogation techniques, but rather not giving this foreign national would-be mass murderer full rights, as if he were a common criminal rather than a non-uniformed soldier at war.

Mutallab apparently, has been happy to tell all he knows without even being interrogated formally, which makes the entire foiled attack even more absurd: a Nigerian radical Muslim buys with cash a one-way ticket, carries no check-in luggage, was previously reported by his own father as a threat to America, and boards a plane to America after previous stays in Yemen?

Before we even get to questions of interrogation, how about first some sanity? And in reaction to all this, Secretary Napolitano nonchalantly talks about the system working like “clockwork”? I think very soon we will hear of no more “overseas contingency operations” and “man-made disasters”—and no more Janet Napolitano as head of our homeland security.

And when the next official struts and says “Bush did it”, the public will sigh “Thank God, he did”, since in comparison with the seriousness with which the prior administration dealt with terrorism, the Obama team seems to consider radical Islam an interesting catalyst for a civil liberties debate. “Reset” button probably won’t be used any more either—the phrase is too ironic now, and would mean going back to our anti-terrorism policies from 2001-9, which are preferable to the present mess. In political terms, one cannot ask millions of Americans to take off their belts and shoes, and then not put someone like Mutallab on a no-fly list.

FP: The fate of Gitmo?

Hanson: With over 100 Yemenis in Guantanamo, I doubt the facility will be closed; perhaps it will be virtually closed like the Iranian deadlines to stop building a bomb, or the health-care deadlines. I doubt too that Khalid Sheik Mohammed is ever tried in New York; that partisan gambit will be quietly Guatanamoized.

The present Obama diffidence—trash the Bush anti-terrorism protocols, bow, and apologize abroad, contextualize the US in the Al Arabiya interview and Cairo speech, promise to try KSM in New York, shut down Guantanamo—does not quite work in the context of a new series of human IEDs being unleashed against the US. Surely there are one or two astute advisors who will take the President aside and quietly say, “Your present rhetoric and policy are nuts! And you will destroy the Democratic Party for 30 years if you continue!”

FP: Abdul Mutallab doesn’t seem to come from the ranks of the poor, the oppressed and the downtrodden. What does this do to the Left’s belief that the devil made them do it when it comes to our enemies?

Hanson: Well that debate was over long ago, when we learned of the past profiles of the 9/11 killers, the West Bank suicide monsters, and many of the human bombs who went off in Iraq.

The angriest at the West are those with enough money, and education to have developed a full sense of inferiority, self-disappointment, envy, and jealousy. A Major Hasan or Mutallab or Atta inside the West sees the prosperity, liberality, informality, and success around him, begins to figure that no such thing exists in the world of the Middle East and Islamic world, and, presto, believes America and the Jews ensured that there is no resurgent majestic caliphate. We excite the appetites in these characters faster than radical Islam can repress them. That we too often apologize and convey a sense of shame about our own culture only emboldens these killers in their fantasies.

Every bit as important as our military response and vigilance, is our moral tone, which should be along the following lines: “Dear radical Muslims, you, not us, created your present misery through religious intolerance, gender apartheid, statism, corruption, tribalism, anti-scientific fundamentalism, and autocracy, and we have neither regrets about our own success nor responsibilities for your own self-induced miseries, unfortunate as they are.” Until they get that message, we will have the sort of image conveyed by Obama in Cairo and his Al Arabiya interviews: pleasing to the world, but a signal to those who despise the US that we really do not believe in our own exceptional history and institutions.

FP: You mentioned Napolitano, her moronic statements, and how she might not be around much longer. What’s the psychology here of this administration and its overall dance with denial?

Hanson: They seem very naive and inexperienced, almost as if to say: “This is not supposed to be happening to me; I was elected to undo George Bush’s anti-constitutional, so-called war against terror, not actually fight real life terrorists.” In this administration everything is “isolated” and “allegedly”, unless you’re the Cambridge police, and then we really can snap to instantaneous judgement.

Again, I think the Obama administration felt that it would prance in, and end the bad war in Iraq, finish off the good war in Afghanistan, and dismantle the unnecessary Bush crusade against mythical dragons. Instead, they learned that Iraq was essentially won by Bush, Afghanistan is heating up, and there are thousands of al Qaeda terrorists who hate us for who we are, and don’t give a damn that our President’s middle name is Hussein. We are no longer dealing here with college deans and TV pundits who are wowed by split-the-difference, hope-and-change soaring rhetoric.

FP: Two of the four leaders behind the Northwest Airlines passenger jet appear now to have been released by the U.S. from the Guantanamo prison in November, 2007. Significance?

Hanson: It reminds us of what happens when the Bush administration caved to the popular slur that Guantanamo was a veritable Gulag, and also reminds us that those in Guantanamo were there for a reason.

We have this la-la land fantasy that there are perfectly good and bad choices. But there are no such things. We are targeted by premodern killers, out of uniform, who are keen students of Western doubt and guilt. And in dealing with them, there are no easy solutions, as is always true when the postmodern meets the premodern.

Guantanamo was a bad solution amid far worse alternatives. Candidate Obama demogogued the issue, as he did tribunals, renditions, and the Patriot Act, and now, invested with responsibility rather than mere rhetoric, can’t close it when he promised. ‘Guantanamoize’ is a good verb for incessant rhetorical deadlines that are never met. Ask Ahmadinejad.

FP: Concluding thoughts? What most worries you about the threat we face and the people who are supposedly overseeing our protection?

Hanson: Our well intentioned leaders see radical Islam more as an alternative world view that has grievances, rather than a sick, perverted Nazi-like creed that wants to take the world back to a 7th century theocracy, where freedom is denied, heretics and gays stoned, and women relegated to servile status–all overseen by rather creepy autocrats that destroy almost any modern institution they encounter.

Too often Obama, Biden, Holder, Napolitano, etc. see terrorists in terms of domestic criminals, not as enemy combatants. But once one wades into that legalistic mess of war being a judicial circus, nothing good comes from it: is it a supposed sin to water-board the confessed architect of 9/11 to find out about future mass murdering, but OK in legal terms to be district attorney, judge, jury, and executioner in a nanno-second when sending Predator drone hellfire missiles into the mud-brick compounds of suspect terrorists and their families in Waziristan?

We are in a race between sober people around Obama trying to apprise him of the danger, and his natural Carter-like take on America’s partial culpability for world tensions. Let us hope that the serious people win.

FP: Victor Davis Hanson, thank you for joining Frontpage Interview.

See: http://frontpagemag.com/

Austrian School of Economics is Not Dead!

See Through the Headlines
Peter Schiff

The good news that everyone has been waiting for apparently came in the form of the recent better than expected jobs report. With the official unemployment rate lowered to 10.0% from 10.2% (Bloomberg, Dec. 2009), investors assume that the economy is improving. As a result, the feeling is that the Fed will accelerate the timetable for its highly anticipated "exit strategy," which will supposedly withdraw the excess liquidly that has driven the dollar lower and gold higher. This belief propelled the U.S. dollar to one of its best days in recent memory and set up gold for a fall of over $100 per ounce. However, the conclusions sparked by the jobs report are wrong on several counts.

First, the economy is not improving. All that has happened is that we have gone deeper into debt by borrowing and spending more money that we don't have. A closer look at the jobs numbers confirms that the areas that showed the greatest strength were those that benefitted the most from federal monetary or fiscal support. The Fed cannot remove the liquidity without cutting the legs out from under this phony “recovery.” The Fed likely knows this, as evidenced by Bernanke's subsequent testimony. As it has shown in countless past episodes, the Fed has no intention of removing the punch bowl.

Even if Bernanke & Co. were to slowly tighten, it would be too little too late to help the dollar or restrain gold. To make a meaningful impact on the trajectory of these mega-trends, the Fed would likely need to pursue aggressive interest rate hikes and sell down its holdings of treasuries and other toxic debt. However, such a sensible, yet politically untenable, policy seems completely off the table. Even if the Fed did pursue such a strategy, the dollar might rise initially, but would likely sell off as the phony economy collapsed as a result of higher interest rates and tighter monetary policy.

We have once again made the same trade-off we did during the last recession. We have decided to defer the pain of an economic rebalancing by adopting aggressive monetary and physical stimulus which merely lays the foundation for an even greater economic disaster down the road. It's shocking how few observers note the repeating pattern.

The vast majority of economists take it on faith that the stimulus can be withdrawn without pushing the economy back into recession. But based on the distortive affect of stimuli and bailouts, our economy has adapted to a climate where cheap credit is plentiful. As a result, our economy is less able than ever to survive in a world in which stimulus is removed. But eventually, the cheap credit will dry up. Not because the Fed decides it should, but because our foreign creditors stop lending. When that happens, our downturn will be even more debilitating in the future than it was in the past.

We will never have a sustainable recovery until all the imbalances are allowed to be worked out, but as long as the government keeps stimulating, this will never happen. Instead, we will have a string of crises escalating in magnitude until a complete collapse of the dollar brings the process to a halt.

In the meantime, I believe pullbacks in the price of gold should be viewed as buying opportunities, and any rallies in the dollar as a chance to add to your foreign investments. Remember that in trending markets, the biggest moves usually occur in the opposite direction, at least until the climactic end. This keeps the speculators in check and the timid on the sidelines. However, those who understand the fundamentals will stay with the trends until the doubters finally throw caution to the wind and join the party -- just as it's getting ready to end.