Opinion: Is It Twilight in America?

How can this be prevented? In addition to normalizing interest rates, the government can radically change tax and spending policy to encourage private savings and investment in small businesses, new technologies, energy independence, infrastructure, education, job training and modernization of our manufacturing sector.

This would involve shifting from an income tax to a consumption tax, providing tax breaks for companies to invest in research and long-term projects, government spending on infrastructure and investment in technologies for the future. It will also need to involve spending restraint, such as cutbacks in things like corporate welfare for poorly run companies, entitlement handouts like Medicare and unnecessary farm subsidies.

Until we start moving in that direction, investors holding most of their assets in dollars should avoid any long-term bonds and instead short some long-term Treasuries through buying an exchange-traded fund such as Ultra Short Lehman 20+ Treasury ProShares (TBT Quote) and hold some gold and silver through buying an ETF such as PowerShares DB Gold Double Long ETN (DGP Quote). Investors should avoid most stocks except for some very strong and unleveraged multinational companies that sell health care products and consumer staples. This can be done through buying an ETF such as Consumer Staples Select Sector SPDR (XLP Quote), which holds such companies as Coca-Cola (KO Quote), Philip Morris (PM Quote), Wal-Mart Stores (WMT Quote) and Colgate Palmolive (CL Quote) or Health Care Select Sector SPDR (XLV Quote), which holds pharmaceuticals like Pfizer (PFE Quote), Merck (MRK Quote) and Johnson & Johnson (JNJ Quote). These companies would benefit from a weakening dollar and a flight to relatively defensive names by investors. Ultimately, all of the major currencies will follow the dollar into devaluation to stay competitive, so I don't believe that holding a lot of foreign currencies is going to be very helpful in the long run.