The Weekend Edition is pulled from the daily Stansberry Digest.

The sense of desperation is palpable...

Chances are good that if you're reading this, you've experienced some degree of personal and professional success in your life. At the very least, you're putting the odds in your favor.

But for a growing number of Americans, the situation is getting worse by the day. A comfortable living is out of reach. Many feel helpless and are losing hope. Their perception is changing how they live... and the economic makeup of our society.

As investors, it's crucial that we understand the dynamics behind this despair... and how it plays into the next downturn.

It's the only way we can grasp what's coming and get prepared now while there's still time. Failing to do so could be the single costliest mistake you may ever make as an investor.

As I will explain today, taking precautions now is the only way to protect the wealth and well-being of your family.

We're rapidly becoming a society of "haves" and "have nots," and the divide will only grow from here...

The "haves" are the wealthy, or those who have the ability to create wealth. The "have nots" don't... and tend to fall into the category of unskilled labor.

These days, unskilled labor is becoming less economically valuable. Gone are the days when industrial firms competed for unskilled workers in large quantities. Artificial intelligence, outsourcing, and automation are making this work cheaper.

Consider the 1.7 million truck drivers in the U.S., for example...

Currently, it's one of the most important jobs for our economy, and it's the most popular job in 29 states. But eventually, fully autonomous vehicles will replace the industry altogether. We're already seeing this technological shift in other industries, like customer service.

As you can see in the following chart, income for the top 20% of earners is growing at 4% a year, whereas the bottom 20% are seeing their income fall by 4% a year...

Today, the "real" unemployment rate is higher than any boom period in the past two decades...

The media often report the Bureau of Labor Statistics' ("BLS") "U-3 measure" – which only measures people who are in the workforce – as the official unemployment rate. The U-3 rate is currently 3.6%, the lowest level since 1969. But the U-3 rate only factors in folks who have looked for a job in the past four weeks as part of the labor force.

Plenty of unemployed people out there want to work but haven't applied for a job in the past four weeks. The BLS refers to this group as "marginally attached workers." Regardless of whether they want to work, the U-3 rate no longer considers them part of the labor force.

Meanwhile, the U-3 rate also considers people working part-time jobs to be employed. So you can see why this isn't a completely accurate measure of unemployment.

When you include marginally attached workers who have applied for a job in the past 12 months and part-time workers (known as the "U-6 measure"), the unemployment rate doubles to 7.3%. But in reality, it's even higher than that...

If someone hasn't applied for a job in the past 12 months, he is no longer considered a "participating" member of the labor force.

The "labor participation rate" measures the sum of all employed workers divided by the working age population. From 1996 to 2001, 67% of the working age population was consistently participating in the labor force. Since then, workforce participation has steadily declined to today's level of just 63%.

Many of these people still want to work... But they're unskilled, discouraged, and have stopped actively looking for a job. Using a labor participation rate adjusted to a constant 67%, we get a more accurate picture of the "real" unemployment rate, which is 11.3%, as you can see in the chart below...

Real unemployment is considerably lower than it was shortly after the financial crisis, when it spiked to 19%. But it's still three times higher than the commonly reported and misleading U-3 measure.

Despite years of Federal Reserve policy used to "goose" the economy with low interest rates, real unemployment is still considerably higher than what we saw at the end of other "boom" periods.

But even full-time employees across the country aren't in great shape...

The average U.S. worker is paid around $23 an hour, but he's barely keeping up with inflation. In real terms, $23 an hour has the same purchasing power as approximately $6 an hour had 40 years ago. In other words, the average wage earner's purchasing power hasn't budged in the past 40 years...

That's one reason we've seen such a staggering increase in total household debt. That figure has climbed 18 quarters in a row and sits at a new all-time high of $13.5 trillion.

So it's no surprise that two in five U.S. adults don't have $400 in their bank accounts in case of an unexpected expense. Almost half of the U.S. population is completely broke.

The Fed knows how fragile the U.S. financial system is...

That's why it stopped raising interest rates. As you may recall, the Fed raised interest rates from 0% in 2015 to between 2.25% and 2.5% last year. It was set to raise rates two more times in 2019, but suddenly it just stopped.

Late last year, bad debt soared. More than 7 million auto loans were seriously delinquent – or more than 90 days late. It was the highest level ever since the New York Fed started to keep track 20 years ago. Credit-card charge-offs spiked across all major banks. The economy couldn't handle the higher rates, and the market plunged.

The Fed panicked and halted rate hikes, which temporarily paused the meltdown.

But the Fed can't fix the fact that almost 80% of the U.S. is living paycheck to paycheck, according to a survey by employment website CareerBuilder... or that nearly one in three people is a subprime borrower with a credit score of less than 620. (Subprime borrowers pay average interest rates of around 23% because of the high probability that they'll stop paying. They're the ones who can least afford to be in debt.)

So we have a divided workforce... record-high household debt... bad credit across a huge chunk of the U.S. population... not to mention soaring corporate debt, which is also at an all-time high and almost double what we saw before the last financial crisis.

That's a recipe for an economic reckoning that will make the last financial crisis seem tame.

Unfortunately, the Fed's ability to keep this expansion going has just about run its course...

As my colleague Mike DiBiase pointed out in the May 4 DailyWealth, the warning signal we're looking for is an inverted "yield curve." As he wrote...

Pay close attention to the so-called "yield curve" – the difference between long- and short-term interest rates.

Most of the time, long-term rates are higher to compensate for the trouble of tying up your money for longer durations. But when that relationship flip-flops, the yield curve is said to have "inverted."

You can measure the yield curve in a number of ways. The most common is the "10-2 yield curve" – the difference between rates on 10-year U.S. Treasurys (which yield 2.52%) and two-year Treasurys (which yield 2.31%). The difference is just 21 basis points (0.21%) right now. In other words, the yield curve is extremely close to inverting.

This has not yet happened. But several less-common measures have already inverted. So it could happen soon.

In short, the next bear market is coming...

And it will not be an ordinary one. It can't be. The debt levels and divide between the "haves" and "have nots" are so extreme that a downturn just as extreme is needed just to get back to normal.

The last time we experienced a major market disruption was in 2008. We all remember how that felt, as people watched their life savings plummet with no sign of relief.

Sadly, last time around, many people lost everything and never recovered. But that all could have been avoided back then... and it can all be avoided again this time, too.

You don't want to wait until most folks are panicking. By then, it will be too late. You must learn what you can do to protect your family's well-being right now.

That's why we hosted a special Bear Market Survival Event earlier this week...

Stansberry Research founder Porter Stansberry and legendary investor Jim Rogers sat down to go over everything you need to do to survive – and profit – when disaster strikes. They covered why the next bear market will be the worst in our lifetimes... how to know when it's arriving... and what to do before, during, and after to actually grow your wealth while other folks wrestle with disaster.

If you missed our event, you're not out of luck... For the next couple of days, you can watch a free replay right here.

Regards,

Bill McGilton

Editor's note: During our Bear Market Survival Event, we unveiled an extraordinary new tool. It's a way to make the most of the Melt Up – as stocks make their final big move higher in this historic bull market – and be positioned to protect your wealth and pounce on opportunities when the inevitable bear market arrives. Watch the free event replay here.