I try not to think about silver, because when I do, my head ends up whirling around at the sheer compelling nature of the fundamentals, and I always come to the conclusions that whirling makes me dizzy and that I need to buy more silver right away because silver is going to start exploding in price over the next few years, it could happen soon enough to do me some good, especially considering the sorry state of all alternative investments right now and the sorry state of just about everything right now, and by the fact that I am slashing the kids’ allowances to zero, freeing up some of the cash I will need!

But sometimes something comes along that makes me think about silver, such as David Morgan of the silver-investor.com site reporting that “during the past ten years, silver’s use in industry has gone from roughly 35% of the entire annual production in silver, to greater than 50%. Not only that, but it is the fastest growing area of the silver market.”

A few days ago I came across an interesting article from economist and investment advisor Mark Skousen, who wrote an article on the Friedman Effect that struck me as superficial.

What particularly irked me: "The stock market will probably continue to push higher for now, due to the lag time in the Friedman Effect. The Dow might even reach 10,000 by the end of this year."

The dominant belief on Wall Street, and in the Ivory Towers of the academy, is that the central bank can minimize the pain caused by growth slowdowns by inflationary policies (dropping interest rates, backstop the banks, support increased government borrowing), and then later reverse those policies once the economy is growing again.

Through its rhetoric and actions, the Obama Administration has made it clear that no matter the current or future costs, the federal government will not allow a collapse of the banking system. The resulting aura of certitude has, in turn, encouraged investors to roll the dice one more time. Some of these investors are likely trying to make good prior investment losses through speculative trading in U.S. equities. The surety of the government guarantee has sadly allowed them to overlook the fact that U.S. corporate earnings continue to fall.

So, as is the case with all government guarantees, the risks our economy faces are now disproportionate to the opportunities. Haven't we been down this road before?

The operative question remains whether the government can reward the current round of investment by averting an economic depression. If not, what is the justification for investing in U.S. equities or high-yielding corporate bonds?

Before, I launch into this article, I want to thank Seeking Alpha and The Money Show for allowing me to present my workshop not long ago at Mandalay Bay in Las Vegas. I'm always nervous when I speak to crowds about the inevitable failure of the dollar and Treasuries - I never know how safe I am, playing the role of messenger. The response, however, has been overwhelmingly positive; it seems the most astute investors are beginning to accept - and even prepare for - the advancing collapse.

I also want to make a quick point about my intentions: I have very little to gain, financially, by convincing any of you that I'm "right." I do have a novel on store shelves that subtly incorporates many of the epistemological constructs that have gone into my research, but these articles are by no means part of a massive campaign to sell copies of Discipline; my objective is to disseminate these theories to as large an audience as possible in order to generate debate and criticism. More than anything, if I am right, I want people to prepare for what's coming, so we can all minimize the shock and pain that will ensue. As a species, we will have to find a new way of doing things, because the consequences of the old ways are descending upon us like a maelstrom. And if I'm wrong, well, I'd just like to know it as soon as possible. But I obviously don't think I am.

I despise Alan Greenspan more than all others (which is saying a lot, as I think most Earthlings are pretty damned stupid!), and it is he that I ungraciously characterize as the most obviously mentally ill, low-IQ, delusional lowlife scumbag on the face of the planet because he is directly responsible for every economic and financial problem being suffered by anyone on the planet, either recently, now, or in the decades to come, and all because he was Chairman of the Federal Reserve from 1987 to 2006 and he behaved abominably by creating excess money and credit the Entire Freaking Time (EFT) and which produced the now-catastrophically-bursting bubbles in stocks, bonds, houses, derivatives and size of government.

He pays no attention to me or my crudely-made sign that says “Greenspan Bites The Big One (GBTBO)!” and he says that he sees the “beginnings of the bottom” to which I mumble, “Whatever in the hell that is supposed to mean! Hahaha!”

I mean, this is the guy who said he couldn’t recognize a bubble except after the fact, who said there was no housing bubble, there was no bubble in anything, derivatives are good things that diversify risk, and whose disastrous tenure at the Federal Reserve is what created the bubbles in everything!

This week, based on indicators of improving Chinese manufacturing activity, commodity and stock markets surged in the Pacific Rim. It appears that China's recession-fighting policies are being judged successful. The 41 percent rally in Chinese stocks in 2009 from the 2008 lows dwarfs the single digit rallies in the U.S. and Europe. With Western economies still sluggish, eyes are turning eastward for solutions to the global economic riddle. As such, recent hints at the direction of Chinese monetary policy should be closely regarded.

At the recent G-20 London meetings, China called for a new international monetary order with a gold link. This was followed by the sudden disclosure that China had used part of its huge gold output to boost its own reserves by some 600 metric tons, a 75% increase in total holdings since 2003. In his first hundred days in office, President Obama's administration has injected nearly $40 billion each day into U.S. economy. Given the inflationary impact that such a torrent of new cash will spark, it is logical that the Chinese hedge their $1 trillion dollar position with a more reliable store of value.

It's easy to build a 401(k) portfolio that reflects the conventional wisdom on long-term investing. You put your money largely into stock funds. You are advised to put something into bonds and move more into bonds the closer you get to retirement. But for return, you rely on stocks.

"For the long-term investor, stocks are supposed to add 5 percent per year over bonds," writes Robert Arnott of Research Affiliates, in the Journal of Indexes. Then comes contrarian shock therapy. "They don't. Indeed, for 10 years, 20 years, even 40 years, ordinary long-term Treasury bonds have outpaced the broad stock market."

If stocks made 5% a year more than bonds, it would compound to a huge difference over decades. Mr. Arnott sets out the evidence. From 1802 to February 2009, stocks actually made 2.5 percentage points a year more than bonds on average. That's the compensation for the greater risk you take by being a shareholder rather than a debt holder.

Economic conditions look no better, so what’s driving the stock rally? People appear to be moving money into the market, encouraged by Washington’s big stimulus package and various policies to shore up mortgages, debt instruments and bank balance sheets.

We’re near or at the stock market bottom, says Gus Faucher, director of macroeconomics at Moody’s Economy.com. At a conference sponsored by Dow Jones Indexes, he argued that the economic downturn is intensifying but policy actions should break the vicious cycles of unemployment, foreclosures, credit contraction and shrinking trade flows.