By James Rickards

Today's investment climate is the most challenging one you have ever faced. At least since the late 1970s, perhaps since the 1930s. This is because inflation and deflation are both possibilities in the near term. Most investors can prepare for one or the other, but preparing for both at the same time is far more difficult. The reason for this challenging environment is not difficult to discern.

Analysts and talking heads have been wondering for five years why the recovery is not stronger. They keep predicting that stronger growth is right around the corner. Their forecasts have failed year after year and their confusion grows. Perhaps even you, who have seen scores of normal business and credit cycles come and go for decades, are confused.

If this “cycle” seems strange to you there's a good reason. The current economic slump is not cyclical; it's structural. This is a new depression that will last indefinitely until structural changes are made to the economy. Examples of structural changes are reduction or elimination of capital gains taxes, corporate income taxes and the most onerous forms of regulation. Building the Keystone Pipeline, reforming entitlement spending and repealing Obamacare are other examples. These are other structural policies have nothing to do with money printing by the Fed. This is why money printing has not fixed the economy. Since structural changes are not on the horizon, expect the depression to continue.

The soup lines are here. They're in your local supermarket.

What's the first thing that comes to your mind when you think of a depression? If you're like most investors I've spoken to, you might recall grainy, black-and-white photos from the 1930s of unemployed workers in soup lines. Or declining prices. Yet if you look around today, you'll see no soup lines, read that unemployment is only 6.2% and observe that prices are generally stable.

How can there be a depression? Well, let's take each one by one.