What's next for the economy?

James Cramer describes in the New York Magazine what the inevitable result will be of Bush's out of control spending and ridiculous tax cuts.

For the longest time, because Bush is a Republican, we on Wall Street simply didn’t believe that he could be a reckless spender. We knew only two paradigms: You either spent less and cut taxes or you spent more and raised taxes. Both courses at least presumed some sacrifice at some time. Not Bush’s plan. He’s gone on both the biggest spending binge and the lowest taxation course in U.S. history, which, alas, will produce gigantic liabilities down the road. Of course, he’ll be back on the ranch by the time his successor will have to deal with his inflation and currency debasement. Our only hope that financial disaster won’t strike sooner lies with the Chinese, who actually fund our deficit by buying our Treasuries—$242 billion worth, or 12 percent of all foreign holdings. If the Chinese decide to be good communists and stop buying our bonds, the Feds will have to raise rates to attract new investors and the reaper will be at our doorstep with interest rates more akin to those of South than North America. Right now, it’s not a problem. But in a year or two or maybe less, I perceive that the government will throw a bond auction and nobody will show, including the Chinese, until rates shoot up dramatically.

What if that happens? What if our fiscally clueless president really does keep spending at a rate that far exceeds what our government can take in at these low tax rates? What happens if the president’s acolytes and the Pollyannas in Treasury keep believing that we can grow our way, fairy-tale-like, out of this jam? You can bet that when you cash out your nest egg of nice U.S.-based mutual funds and solid common stocks, your dollars will fit nicely into a wheelbarrow designed specifically to cart worthless currency to the bank.

Or you can take matters into your own hands and build a portfolio around these five imminent-Bush-disaster stocks. Be the first on your block to immunize yourself against what may turn out to be the most financially reckless president in history with these anti-inflation equities designed to profit from our president’s unbelievably foolish Panglossian profligacy.

Any portfolio designed to counter government-mandated inflation has to be bedrocked in gold, and there is no gold outfit that can rival Goldcorp, known as Gigi on Wall Street for its GG symbol. Gigi is on pace to produce 1.1 million ounces of the precious metal this year, with a finding cost of $60 per ounce (significantly lower than the industry standard). While Gigi is wildly profitable with gold at $465—you didn’t know gold had shot up that much lately? Well, what did you expect with this deficit?—I figure gold could reach $1,000 if the Chinese stop buying our paper. Once the levee to the Treasuries breaks, the easy high ground worth gaining will be gold. Gigi’s got no debt and is incredibly well run—the only gold stock you will ever need. Oh, and like all the companies in this portfolio, it’s not based in the United States, so it’s less tied to the health of the U.S. economy and the strength of the dollar. What a godsend!

When paper gets debased, you can’t have enough minerals, gold or otherwise, in your stock basket. That’s why I think you should shell out $160 a share for Rio Tinto, the world’s largest mineral seller—it produces silver, copper, iron ore, coal, diamonds, and even zircon (what New York society may be stuck wearing if government spending stays unchecked). Minerals keep their value during periods of inflation, and Rio Tinto has become the chief supplier for China’s industrial revolution.

Cramer also has three other recommendations.

You need Total, the French Foreign Legion of oil companies. Whether it’s building nuclear power plants to generate electricity or steam to blast oil out of the ground in Canada, or drilling in Iran and Myanmar—two places we aren’t all that welcome—Total’s got your bases covered for the surge in crude.[...]

Using pioneering techniques, Sasol’s got the only gas-to-liquids technology that can save the Free World from our insatiable thirst. Of course, it can’t make enough of the darned stuff, but what it can make, it will be able to charge a fortune for. Added bonus: Sasol’s located in Johannesburg, so be sure to take your 2.6 percent dividend and leave it in Krugerrands in South Africa.

I like Fording Canadian Coal Trust because it yields 14 percent and has long-lived reserves that will certainly outlast this administration. It would help if you were domiciled in Canada, a nation also once known for its profligacy but now a beacon of fiscal sanity, because then you wouldn’t get dinged by Uncle Sam’s Canadian withholding tax (generally 15 percent). That way, you could take the dividend in the very strong loonie, long a laughingstock currency until this president decided that debasing the greenback is just one more acceptable casualty of making sure that the rich get richer with extremely low taxes. Thanks, Mr. President!

So there it is.

We can look for high interest rates and very high inflation, probably accompanied with increased unemployment. This is likely to begin significantly occurring within a year or two from now. But if you are part of the investing class, you can invest in minerals and stay ahead of inflation.

As in all stock recommendations, you should do your own homework. But the impending problem and the logic of defending your investments is here.

Personally, I own my own home with a fixed rate mortgage. Inflation will bail me out of the mortgage since my military pension is tied to the CPI and should increase with the rate of inflation.

I hope.