Financial Strategy?

There have been several folks here at 2old2play who are recently out of work and so I feel a little self conscious about worrying about money when I have it so much better off than some.

But here goes.

Im worried about our economy. Really worried. I wouldnt call it panic as I know I will get by whatever happens, but I think our country is in for some serious economic pain.

Great Depression type pain. Massive inflation type pain. This recession or downturn or whatever you want to label it may not be the actual big downturn but I feel like it is probobly the precurser to the big one...if not THE one.

Our debt (both the governments and the general populations) is staggaring. It feels like Washington has fallen for the classic loan officers ploy..sure it looks like a big payment but if you budget well you'll do fine..plus you should be in line for a raise soon so that will all be ok. Unfortunately the budget is not followed and the raise doesnt come. Then your adjustable arm adjusts up and your screwed. The US's budget is a joke and has been for decades. The raise is not coming..from what Ive been reading, we are in for a large to massive economic decline. The war, the housing bubble, oil prices are all dragging us down..And the average person has no safety blanket other than declaring bankrupcy. I read that one of the Bond agencies is getting ready to downgrade US Bonds. That will be our national ARM adjusting up.

The foreign countries who hold most of our debt for us are somewhat bound to our fate. If they demand payment, we default (as we would have no other choice) and the whole world enters a massive depression. So they are constrained to play ball at least in the short term.

The baby boomers are getting ready to retire in waves. This has untold repercussions to the economy. They will stop contributing to the stock market and start withdrawing in huge numbers...that spells decline in the market. They may start selling off any extra property they have...a further glut of houses for sale. They will start demanding Social Security checks from a system that is woefully underfunded. They say the average retiree is going to retire with something in the neighborhood of $30,000 in cash. They are obviously counting on a pension or something..as someone in the airline industry I say good luck with that. We were forced to raise the retirement age to 65 because of everyone who lost their pension in the last few years.

Bills are coming that will have to get paid. Either the government sells off vast amounts of land or other assets or it starts printing money. We will have to re-think our outrage at foreigners owning our ports and other inferstructure.

Either way, it appears to me that the US's stint as the world economic power is coming to an end. The USSR collapsed under the financial burden of trying to win the Cold War. We may collapse trying to win the battle of the Jonses.

I imagine we will end up printing the money and inflating the debt away.

So what should I do to prepare for all this?

My first plan is to refinance my house into the longest fixed rate loan I can get. If the goverment is going to inflate the debt away, then I might as well get on that train and do it to my house. I am fortunate in that regards as I have excellent credit and still have equity in my house after the recent decline so I am one of the few who can actually get a loan.

Secondly, I plan on taking advantage of the housing bubble bursting and try and pick up a few rental properties. The rent will be handy..especially if inflation hits hard and I can raise rents to compensate. Secondly the house should go up in price..if not in real value..at least to match inflation. Again, its mainly a hedge against inflation.

My real problem is that my main investment vehicle, like most people, is a 401k. I have taken a big hit this year already..I wont get into numbers too much but it lost alot. As much as some people make in a year. Ok, that hurt, but Im fairly young (just turned 38 ), I have time to recover. I was also in a very aggressive portfolio..so bound to take the big hit. The pisser is I was looking at it around new years and seriously thought about moving my money into something lower risk but didnt. I finally did the other day...but a little late.

Back to the problem. 401k's (at least mine) just arent built with enough options to really allow much lattitude in invesments. Various mutual funds (mostly domestic stock market stuff with a couple foreign exchange options) categorized by perceived risk. A couple bond funds and a couple money market funds. What do you do if you want to bet against the US and by extension the world economy for an extended period of time like say a decade? There are no gold funds..or REITS, or hedge fund options. No access to currency markets. Hell, right now I would take a pile of Canadian dollars under my mattress over even the so called safest fund in my 401k plan. Ok, maybe not quite..but close.

Should I stop contributing to my 401k for awhile so I have more cash to work with in real estate? Should I take the tax hit a cash my money out? Maybe take out a loan against my 401k (another inflation hedge)? Maybe I should just spend it all and declare bankrupcy along with everyone else.