Currently, there are two economies. Industrial and precious metals, energy, real estate, and natural resources are bullish because in some of these sectors, there is a shortage of product. The shortage is so acute it is causing bottle necks in production and is contributing to the jobless recovery factor.

Then there is the constant increase in the cost of energy, lumber, natural gas, and steel, to mention a few. These price increases are forcing U.S. corporations to outsource as many jobs as possible overseas to cut costs and remain competitive in the global marketplace.

We are now suffering from the early effects of price inflation. Rather than allow the economy to adjust to this inflation without taking drastic measures to slow its progress, the government is doing everything possible to keep it from flowing down into the retail sectors. However, it doesn't pay to fool around with the natural forces that form the economy.

As always, there is no free lunch. Inflation is two-tiered and it's the corporations that are suffering. In order to survive, companies must take from their employees. In recent years, companies have had to cut back on benefits such as health care and the method in which retirees' benefits are calculated.

As the federal government reduces taxes, it has also reduced the amount of money going to state governments. The states have had to cut social services as well as infrastructure spending.

To continue to maintain their lifestyles, Americans with home ownership (about 68% of the population) are pulling the ever-increasing equity out of their homes to finance everything from lavish vacations to home improvements.

Price inflation will eventually have to filter into the total economy, perhaps as soon as summer. When it does, it will be because the dollar has again started to lose value. A devaluing dollar will give the U.S. its export trade advantage, while simultaneously making imports more expensive (except for those trading partners, such as China, who have tied their currencies to the dollar).

Ironically, it is a devaluing dollar that will bring job creation back to America and it may happen sooner than later. I expect the U.S. economy to grow between 3% to 4% in 2004. However, if steps are taken to strengthen the dollar, then more jobs will be lost and the economy will stagnate.

Punishing our trading partners with tariffs and expulsion will not solve our economic problems. It will only lead to trade wars. If left unsolved, trade wars eventually lead to the real thing.

Dollar devaluation will be our only salvation at this time. I recommend you buy inflation hedges such as gold mining shares and independent oil and gas and natural gas companies. I like Bema Gold, Kinross Gold, Pan American Silver, Golden Patriot, Nieve Oil & Gas, and Swift Energy.