The Chinese and U.S. stock markets felt some big losses today–almost 9% in China and 3% state-side. These are the kind of losses that you hear about every 5 to 10 years. But is it over, or just beginning?

In December, I predicted that the stock market “may be able to maintain its speculative climb in to insanity for a month or two, but sooner or later things are going to come down.” I believe they are now on their way. If I’m right, then we may see a few turbulent swings up and down, but the trend itself will be all downward.

The reason, summarized by Mike Whitney in The Second Great Depression, is this:

December’s figures indicate that foreign investment is drying up and the world is no longer eager to purchase America’s lavish debt. The only thing the Federal Reserve can do is raise interest rates to attract foreign capital or let the dollar fall in value. The problem, of course, is that if the Fed raises rates, the real estate market will collapse even faster which will strangle consumer spending and shrivel GDP. In other words, we are at the brink of two separate but related crises; an economic crisis and a currency crisis. That means that the unsuspecting American people are likely to be ground between the two mill-wheels of hyperinflation and shrinking growth.

As the saying goes, we’re stuck between a rock and a hard place. As I mentioned in my first article, diversify in to gold and foreign currency if you have the resources. It’s going to be a wild ride, gravity and all.