The Daily Reckoning editor Bill Bonner says there is still a lot more that can go wrong with the U.S. economy. Stocks and bonds have further to fall, and the entire dollar-based financial system remains vulnerable to both inflation and deflation. Bill says gold is still the best way to ride out these coming woes…

We’re sticking with our views and our investments - either until we’re proven wrong or we go broke, or both.

Our view is that the great dollar-based credit expansion of the last half-century is coming to an end. And our guess is that it will end with BOTH a bang and a whimper - that is, both a deflationary contraction…and an inflationary blow-off. A deflationary contraction is the market’s normal response to an inflationary boom. And an inflationary blow-off is the market manipulators’ normal response to a deflationary contraction; but, we hasten to add, there is no guarantee that they can pull it off.

So, as usual, we live in a world of great unknowns…and lesser unknowns…and things we don’t even know we don’t know. What we do know is that stocks have not yet bottomed out (they are nowhere near their low points)…and bonds are still expensive (people still lend to the U.S. government for 10 years at less than 4% - that’s substantially less than the current consumer inflation rate)…and the dollar is still treated with respect, even though its long-term value is zero. There is a lot that can go wrong that hasn’t gone wrong yet, in other words. Until it does, we’ll stick with gold.

Source: The Worst is to Come