If you've been watching the news lately you've seen some pretty amazing things.

As of early April 2008, the dollar has been falling fast, the price of oil and gold has been skyrocketing, lots of big consumer and investment banks have been getting tens of billions of dollars over random weekends, and the Federal Reserve has been cutting interest rates with great ferocity.

Newscasters have been using words like inflation, hyperinflation, devaluation, deflation and stagflation. Their manner ranges from baffled to alarmed and back again over the course of every day.

Unless you have a background in economics, or follow the market closely, you may not know what all the fuss is about. You may not realize how many people believe the US economy has become the Titanic . . .

We live in such alarming times that many people have had their circuits blown. They just can't stand to hear another thing called "a crisis". And, after all, the US has the strongest economy in the world right? With professionals running the show . . . how bad could it truly be?

Well, the truth is that national financial disasters do happen. The 1929 Stock Market Crash and resulting depression, the savings and loan crisis, Black Monday, and the crash after 9/11 . . . Each of those episodes had a profound effect on the lives of people living in this nation. No one was unaffected by them . . . So you need to be aware of how what's happening to the fundamental financial structures in this nation because those changes are guaranteed to impact you in life changing ways.

One reason you may find the whole thing hard to fathom is the "experts" we see on TV don't seem to agree on what the problem is. If they can't agree on a problem, maybe there is no problem.

Actually, what we are seeing is a bunch of folks who know a lot about boats watching the boat they are on sink.

• Some of them are talking about the cause of the sinking.
• Some are describing what should be done to fix it.
• Some are talking about who should fix it.

They may all sound like they are saying something different . . . but really they are all saying the same thing. This boat is sinking and they want it to stop . . .

Well, the truth is, people are trying to do things to stop the collapse. The Federal Reserve, which is the huge privately owned national bank that makes loans to other banks, has been trying to help those banks deal with their losses. They've dumped hundreds of millions of dollars over the last few months into "easy credit" for the consumer and investment banks hoping to "bail them out". Their objective is to get banks, which are privately owned businesses, to start making loans for mortgages and businesses again. The Fed can't make banks write loans, all they can do is try to encourage them with easy money and low interest rates.

The Federal Government is trying to put money directly into the hands of consumers. That's why we're all getting a second round of rebates. The hope is that you'll spend that money on something that keeps people employed and keeps businesses open. The problem is . . . most of us will be spending it on our mortgages.

Congress is currently discussing the purchase of foreclosed houses to get them out of the hands of the banks and to cut the banks losses.

As you can see people are trying to do something. The fact that so many people are doing such radical and unheard of things is a really good demonstration that this is a very serious problem that people are very, very worried about. What you see is folks trying very, very hard to keep this economy afloat.

If you look at some other statistics, like the falling dollar, the rising price of oil and gold, the rise of foreign currencies, you would see that many investors are trying to jump into lifeboats because they fear this attempt to save the economy won't work.

The very short answer is, wages haven't kept up with inflation. As a consumer you know that mortgages, health care, gas, electricity, food and the price of almost everything has gone up much faster than how much you get paid.

When it comes to mortgages, many people went out on a limb to buy their house. Loans were easy to get, there was a lot of competition, they could make the payments because they had a steady job . . . so they bought a house. In some cases people expected, as seemed reasonable at the time, that in a couple of years they would be making more. So they took a variable interest rate loan with the expectation they could pay the higher bill when it arrived.

Now they can't pay that higher bill because they aren't getting paid any better and the price of everything has gone up and maybe their job isn't so steady. The rate at which folks are losing their houses is increasing at very high rates. For example, this month in Los Angeles 50% of the houses currently listed for sale are foreclosures.

The result is that banks are losing money. As they become less profitable, they are less likely to make loans, which means people are less likely to take a loan to buy a house and when they do its for a smaller amount than it use to be. The result is crashing home prices.

And, it turns out, when folks can't pay their mortgages, they stop spending money on lots of other stuff like eating out. Sometimes they give up their health insurance and their second car. They cut back their lifestyle in an effort to be able to pay that mortgage . . .

That cut back in consumer spending means businesses have less money . . . so they fire people . . . who suddenly can't afford to pay their mortgages or rents, causing more and wider losses for the banks, causing more credit tightening . . . such that not even businesses can get loans to get through the hard times.

And it gets worse. Bundles of mortgages were sold to investors as "safe investments" over the last few years. So people's 401K and retirement funds have lost value as well. Many investors are pulling their money out of the market, and indeed out of the US economy, in order to try and isolate themselves from these losses. That means businesses can't turn to investors for more money, they can't sell stocks to get it. Cities and states are seeing declining revenues, which means they are having a hard time paying off things like municiple bonds.

What is going on is called a "financial collapse" or a "melt down". Widespread losses in one part of the economy (mortgages) are causing many other sectors of the economy to fail. This melt down may already have effected the price of your home. It may shortly come to effect your job and your credit cards, etc.

The combination of very high inflation and a "stagnant" economy, which is one with high unemployment rates and little to no growth, is called Stagflation.

To survive stagflation it really helps to have cash, or the ability to get cash, because it is what very few people have.

If you haven't refinanced your mortgage so it has a lower payment, now is a good time. If you are lucky enough to be able to refinance, get a credit line to go with your loan. The extra money at a low fixed interest rate can really soften the blow of an unexpected job loss. If you have a variable rate mortgage that is going to increase in less than five years, now is a good time to get out of it. The prices of those could go through the roof if the Fed decides to raise rates again in order to try to contain inflation.

Of course the difficulty is, its very hard to get a bank to give you a loan just at the moment . . .

If you have credit cards, make regular payments. Pay more than the minimum every month. Credit cards, which are owned by banks, do give you access to cash in emergencies. It is one of the last kinds of credit banks are willing to extend because they know they can massively raise rates if you default. In fact some banks have been massively raising rates on consumers when they haven't defaulted. Banks need money very badly . . .

If you are overwhelmed with credit card debt, consider declaring bankruptcy. Credit card debt is unsecured. They usually can't take your house or car. Don't lose your house or car trying to pay credit cards . . . Its better to lose the credit cards and your ability to get new ones.

In my opinion this is not a good time to pay off credit cards unless you have a heck of a lot of cash lying around. Its better to have a cushion of cash you can use to pay your mortgage or make your credit card payments if you lose your job. The six month to a year cushion of cash comes first, then paying off the credit cards.

If you have significant money in investments, I think you might want to find a way to keep the money fairly liquid and out of US businesses that are very likely to be hit by this financial disaster as it grows.

Gold, Oil, foreign currencies have their risks, but you can get your money in and out quickly and their value in dollars seems to be rising. There may come a time when its a good idea to buy property, but values still have a way to fall and its possible that you might get trapped in that fall if you invest now. At the moment dollars are kind of bad bet because they are falling in value so quickly.

Its possible that as credit dries up even more, having access to dollars will let you purchase property and businesses at very good rates.

Now may be a good time to start a home business. Employers may well start letting lots of people go. Anyone who remembers the depression, the troubled economy of the 1970's, or the Reagan era recession can tell you . . . jobs can get pretty hard to come by. If you have a home based business you may be able to soften the blow if you get fired. You may be able to start deducting things like health insurance, internet connectivity, and other costs from your taxes.

It may even be worth borrowing money to start that business if you can get a government secured loan from the Small Business Administration. (Vets: Check out the new Patriot Express Loans which can be granted very quickly and which are government secured which makes them low risk to banks.) Its hard to get banks to make most loans at the moment, but something government secured is fairly low risk.

I've given some specific suggestions in this article. Refinance your mortgage, start a business, perhaps even stop paying your credit cards if they make it impossible to pay house or car loans. Before you take anyone's advice in these troubled financial times, get a second opinion. In fact, get a third.

Its barely possible that the federal government, Federal Reserve and Congress won't find a good way to pull us out of this slump. Governments have screwed up like that before. The US government in 1929, Brazil and Japan in more recent memory, allowed fairly serious financial collapses. I'm not sure anyone can offer you much advice about how to weather that kind of storm without taking some serious financial losses.

But a low mortgage rate, a small business that brings a little cash in, and being forewarned won't be a bad thing . . .