It's scary when you see food and gas prices increase on a daily basis. This is just one of the reasons why most Americans view our economy as being in bad shape. Combine rising prices, increased unemployment, a dollar that has moved beyond weak to comatose and the current real estate earthquake, and you have out of control inflation.

How does this inflation eventually lead to a depression? Simple, it eats away at our disposable income. This is the income we have left over after we've purchased the necessities that we think we cannot do without; necessities like our mortgage and car payment, plus our food and utility costs. Disposable income is what fuels the economy and it accounts for almost 70% of our gross national product. It enables businesses to grow and prosper.

With consumers having less income to spend on luxuries, businesses have to compete harder with each other. At first they use advertising to try to increase sales. If this doesn't work they cut jobs. Eventually they only have one choice left and that is to lower prices.

It's all about basic supply and demand. It's simple economics. Cheap goods should in theory spark spending, but if Americans don't have any income left over after expenses, then prices can only continue to fall. Eventually, even food costs fall, but with less demand for goods, jobs are cut and this is what leads to massive unemployment.

Gas Prices Gold Prices Economic Depression...the Perfect Economic Storm

Unemployment guarantees less disposable income and hard times for all. It's a vicious cycle. During the "Great Depression", unemployment was close to 20%. Goods were dirt cheap, buy few people had the money to buy them. The most that the majority of Americans could do at that time was to keep a roof over their heads and food on their tables. They counted themselves lucky if they could do that.

What is the connection between rising gas prices gold prices and economic depression? Depression weakens the value of the American dollar and sparks fear which sends the price of gold thru the roof. In times of crisis throughout history gold was truly the only commodity to be depended upon. This has been proven time and time again. During World War II, gold was used as the only reliable currency in war-torn Europe. Many people even saved their own lives by trading the Germans their gold jewelry in exchange for their lives.

Wise investors know that gold is the way to protect themselves against bad economic times and that is why the price of gold is on the rise. In fact, in 1968 the average price of gold that year was $38.69 per troy ounce. By 1978 gold had risen to $193.22. Two years later the average gold price was $612.58. Now, while that may sound dramatic, it was actually a fairly gradual and steady increase.

From 1980 to 2001 gold prices dropped steadily until the low of $260.48 in April of that same year. In the last 7 years gold has gradually risen again, with a few short dips, until as of June 2008 it’s over $900 an ounce. Predictions are that it will go to $1500 an ounce shortly.

Look for gold to soar if the economy goes bad and to collapse in value once economic times improve. Funny how history repeats itself isn't it. Until then gas prices, gold prices and economic depression may be the wave of the future. If so, it would behoove everyone to spend any disposable income on getting prepared to weather the economic storm that is now directly overhead.

Gas prices gold prices economic depression...I think the storm has already begun and will just continue to increase in intensity.