Green shoots are okay if you’re a gardener. But what if you’re an investor? Here  at Notes believe investors must realists about the markets. As we like to say: “Hope for the best, but prepare for the worst.”

So today, we want to give you the other side of the green shoots story as told by underground investor James Dale Davidson. James is a good friend and one of the most farseeing investors we know – he’s been making money from economic collapse for over three decades. And he was one of the first to predict the current meltdown in his 1994 book,The Great Reckoning: Protecting Yourself in the Coming Depression.

We’re lucky enough to have James work with us on two paid-for investment research services, Strategic Investment and Crisis Strategy Alert. This means we’re one of the first to read James’s monthly reports on profiting in the downturn.

James has been dead on about many of the recent major shifts in the global economic landscape, including the fall of the Berlin Wall and the collapse of the Soviet Union, the Japanese stock market crash and the recent “junk rally” in US stocks.

James reckons the world is plunging headlong into a global Depressionwith a capital “D.” And in the upcoming issue of Strategic Investment, he has warned subscribers he explains the powerful forces plunging America into what will one day be called the Great Depression II.

Today, the greater part of the U.S. population and certainly many investors chasing the “green shoots” are in denial. They pretend the current disturbance is just another recession that will soon end and that everything will then go back to being as it was before Lehman Brothers went bankrupt.

I don’t think so. We are actually in the early stages of a global depression.

Although it is still heresy to say so, the current economic collapse is an effect of the end of “the American way of life” – that is to say the collapse of the post-World War II growth model, the end of the American seigniorage and the demise of the dollar.

For decades the U.S. economy has atrophied while we lived lazily off of unearned advantages of seigniorage (the ability to print legal tender) like the children of some Gulf sheik whose easy chair floats long on gushers of oil.

It is exactly this phenomenon of lazy entitlement that often makes easy riches a curse rather than a blessing – especially when those riches are lavished on undeveloped economies.

I still vividly remember a conversation I had one afternoon in the 1990s with Lee Kuan Yew, the first prime minister of modern Singapore. He told me in no uncertain terms that he attributed much of Singapore’s prosperity to the fact that it had been blessed by a gracious god who had put oil under Indonesia, not Singapore.

Of course, oil provides significant benefits, including cash-flow. But oil-rich countries are vulnerable to dips in the price of oil. And when the oil wealth cascades down on a nation that fails to invest in developing competitive economic skills, the result is economic stagnation and political dysfunction.

The ‘advantage’ the America has long enjoyed due to its power of seigniorage has finally caught up the economy after decades of slow-motion decline.

You see, the U.S. has used and abused the freedom to borrow and print dollars, because of the absence of the usual penalties that have stopped other economies in their tracks when politicians have ran amok with the printing presses. The long run of the U.S. dollar as the world’s reserve currency (and thus currency of account in international trade) has allowed Americans and other dollars holders to enjoy a purchasing power premium.

To put it in the simplest possible terms, seigniorage enabled us to enjoy a higher living standard than we earned.

This is reflected in the chronic and massive trade deficits through which the U.S. has traded manufactured goods from the rest of the world for manufactured paper money.

In retrospect, it is clear why the U.S. as a nation was lured in the direction we took. Manufacturing money is, in the short-term at least, a more profitable proposition than manufacturing goods. This is why the “best and the brightest” minds in the U.S. left manufacturing to enter the financial sector and why, until recently, finance accounted for 75% of all U.S. corporate profits.

Superficially, it would seem that if other nations send America all the goodies you can find in a Wal-Mart store for a few pieces of script that we can print for a minimal cost, we have far the better of the bargain.

But have we really?

Only if you ignore Lew Kwan Yew’s warnings about the inherently corrosive nature of easy money. And no money is easier than that you make by rolling the printing presses.

[James recently released a shocking investor report on a coming $101.7 trillion debt avalanche about to crush America’s middle-class. You can read it here. This is something Team Obama does not want you to read. We even had trouble publicizing it on Google. Google head honcho Eric Schmidt is a tireless Obama supporter. And his company refused to publish ads concerning James’s report because it was supposedly an attack on the president.]