.....The Credit Crunch Is Now
Reaching an Explosive Phase

More so than at any other time in our history ... and perhaps more so than in nearly every other country on the planet ... ours is a debt-addicted society.

As soon as the debt dosage is reduced, our economy suffers withdrawal pains. And if it's cut off cold turkey, the affected industries go into convulsions — precisely the drama that's unfolding before our eyes:

Credit markets are choking. Sales are collapsing. Companies are folding. Jobs are vanishing. Not next month or next year. Right now.

Just look at how Washington has panicked! In less time than it takes to appoint a dog catcher, Congress has decided to pass the most radical, most grandiose and most expensive financial rescue package of all time.

This unprecedented rush to judgment wasn't just to help members of Congress run back to their election campaigns; it was driven by the utter force of the credit market convulsions.

Specifically ...

Companies are getting cut off. Large corporations regularly issue commercial paper — short-term IOUs — to raise the cash they need to finance their day-to-day purchases, meet payroll, even pay the electric bill.

Before the crunch, in the three years through 2006, they raised an average of $223 billion per year in new money with these IOUs and similar kinds of paper, according to the Fed's latest quarterly estimates.

But now, their access to that instant cash has virtually vanished: In the 12 months ending June 30, not only were they unable to get any new money from this source, but they actually had to pay back $361 billion more than they could raise.

In this kind of credit implosion, virtually unheard of in modern times, the only choice for many companies is to promptly lay off workers, shut down operations or make a beeline to the bankruptcy courts.

Home equity loans are virtually extinct. Not long ago, consumers could go to almost any bank, borrow on their home equity and walk off with a wad of cash to spend. In 2005, for example, they took out $1 trillion in home equity loans.

But now, that giant ATM machine has been virtually unplugged: In the second quarter of this year, the pace of new home equity lending plunged to an annual rate of only $80.8 billion, down by a whopping 92% from its 2005 level. And this credit shutdown is a disaster for all companies that do business with consumers directly ... or indirectly.

Local governments are getting shut out. State and municipal governments typically have easy access to credit because of their tax-exempt status. No more! Now they're being forced to pay more or are dropping out, sending shock waves of local budget cutting across the country.

Detroit is getting slaughtered. In the first three weeks of September, car sales plunged 34% compared to the already-depressed level of one year ago. Why? Again, because of the acute and chronic shortage of credit: No auto loans = no sales.

These convulsions from the debt-addiction withdrawal are hitting small businesses, schools, churches and charitable organizations.

They're sweeping through urban communities, suburbs and farms.

They're slamming everything from Hugh Hefner's Playboy to London's 2012 Olympic Village.

No wonder Washington is spooked! No wonder the president himself is warning about financial panic!

But we've been ready for this for quite some time. We know what to do. And we're going about it step by step, without hesitation ...

Urgent Steps We're Taking

First, we warned our readers about all this a long time ago, telling them to get out of nearly all U.S. stocks. Many have heeded our warnings, and we hope you're among them.

Second, we're taking advantage of any post-bailout rally on Wall Street to help the balance of our readers get out of the market.

Third, as before, we're recommending that you shift the proceeds of your sales to cash, parking most of it in the safest, most liquid place possible: Treasury bills or Treasury-only money market funds....