Investment guru Martin Weiss has long been warning of an economic meltdown. Now his warnings are gaining some steam as negative economic numbers make headlines.

Weiss, who heads Weiss Research and publishes the Safe Money Report from Jupiter, Fla., maintains that the credit crisis is getting worse.

He also believes that Federal Reserve Chairman Ben Bernanke has completely mishandled the crisis, and that the U.S. economy will suffer its worst recession since World War II. He has choice words for Bernanke's predecessor, too.

"I think Ben Bernanke should be thrown out on his rear end like bouncers [throw customers] from a bar," Weiss tells MoneyNews. "And Alan Greenspan should have been thrown out like that, too."

Both mistakenly cut interest rates, Weiss argues. Greenspan's rate cuts sparked the housing bubble of 2001-06, while Bernanke's cuts amount to "trying to push the consequences of the bubble under the rug," according to Weiss.

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He believes the economy entered recession early this year.

"The primary reason is that ours is a debt-addicted economy, and now that the debt drug is being abruptly removed, the entire nation is suffering severe withdrawal pains," Weiss says.

The Fed's reaction to the credit crisis since last summer has been to periodically step in to put out fires, as he views it. "Temporarily things quiet down a bit. Then the firestorm comes back with even greater force," he says.

For example, Weiss continues, "Last August, the Fed and other central banks coordinated various open-market operations to pump hundreds of billions of dollars into the financial system.

As a result, he says, "all measures of the credit crisis receded," particularly a key barometer — the spread between Treasury bonds and high-yield bonds, commonly called junk bonds.

But by early this year, the crisis was back, and worse than ever. Spreads surpassed their July highs, and financial institutions hemorrhaged cash. "Questions were raised as to whether they'd survive," Weiss points out.

Then, in March, investment bank Bear Stearns collapsed and spreads rose to new peaks.

"The Fed steps in and takes radical measures, instituting a questionable lending program" for investment banks, Weiss says. "It dishes out dough in huge amounts, the crisis subsides, and that's where we are today."

So, what's next? Weiss thinks that accelerating inflation will push interest rates higher, truly sending the economy over the edge and perhaps turning the credit crunch "into a credit crack-up."

The Fed's thinking was to cut interest rates first to ease the credit crisis and then worry about inflation later.

"That bridge is now here," Weiss says. "And it's ‘The Bridge on the River Kwai,'" he says, invoking the World War II movie about a British POWs who collaborate with their Japanese captors to build a bridge, only to blow it up in the end anyway. "Suddenly, inflation is popping."

The inflation pipeline began with import prices, which soared almost 15 percent in the year through March, Weiss notes. Then came producer prices, which jumped 6.9 percent in that year, and finally consumer prices, which rose 4 percent.

Now, short-term interest rates are lower than inflation, with the federal funds rate at 2.25 percent and the three-month Treasury bill rate at 1.26 percent. "On an inflation-adjusted basis you're being paid to borrow money," Weiss observes.

"And where is that money going? Into commodities, foreign currencies, foreign stocks, everything that goes against the dollar. That means more inflation and higher interest rates. That's where we're headed," says Weiss.

Higher rates will spell disaster for the housing market, Weiss argues. Housing is "in trouble with low interest rates, so you can imagine what will happen with higher rates."

Ultimately, short-term interest rates will rise, despite all the Fed's easing, Weiss believes.

The Fed "can't keep short-term rates down for long if long-term rates go up. At some point short-term rates will go up, and then you really have a tornado."

The end result will be the worst recession in more than 60 years, Weiss posits. "That's because credit is the engine that drives the whole economy. Take away credit, and you don't have an economy."

He doesn't see problems letting up for major financial institutions. So far they have taken between $250 billion and $300 billion in losses due to the credit crisis, but the International Monetary Fund (IMF) estimates the red ink will ultimately total $945 billion.

"Think about that: The IMF is saying this problem will be three times larger than what we've already seen," Weiss says.

Weiss cites a recent report from the Office of the Comptroller of the Currency showing that banks suffered losses of $11 billion on their credit derivatives in the fourth quarter alone.

It's those derivatives that banks are using to protect themselves from default by counterparties, "but they've turned sour," Weiss points out.

"I don't think the risk has passed for major financial institutions. We're in a lull, and it may not happen right away, but ultimately…"

Weiss predicts that the U.S. dollar, which has repeatedly hit record lows against the euro in recent weeks, will continue to decline.

"There could be sharp rallies intermittently," he says. "But for the long-term, the dollar is a primary victim of this entire crisis."

Meanwhile, the stock market has a 50 percent chance of crashing, Weiss says.

"If you want to hold out for the 50 percent chance [that stocks won't crash], good luck." Weiss views U.S. companies that earn most of their revenue overseas as safe, however, because he doesn't expect foreign economies to tank like the U.S.

"If you have U.S. stocks that aren't internationally oriented, either sell them or buy a hedge, such as an ETF [exchange-traded funded] that moves inversely with the stock market. If you want to make money in stocks, I would buy those that are tied to stuff that is going up — commodities, foreign currencies and foreign economies."

As for which ETFs to buy, Weiss recommends targeting the weakest sectors of the market, such as housing.

Weiss specifically mentions UltraShort Real Estate ProShares (SRS). This fund is designed to move in the opposite direction of the Dow Jones U.S. Real Estate Index and by double the amount. In other words, for every percentage point drop in the index, the fund should rise 2 percent.

To take advantage of a strong foreign currency, Weiss recommends CurrencyShares Australian Dollar Trust (FXA). The Australian dollar has surged 14 percent against its U.S. counterpart over the past year.

Weiss also is bullish on Brazil, though he admits he's biased because his wife is Brazilian, her family has a farm there, and he has the equivalent of a Brazilian green card. "From an analytic perspective, I see Brazil continuing to grow, though with a significant hiccup — whatever impact the U.S. recession has on the country," Weiss says.

"At some point the U.S. recession will have an impact on Brazil, but that's a buying opportunity."

Weiss recommends the iShares MSCI Brazil Index (EWZ), which tracks the MSCI Brazil Stock Index. He also likes the Brazilian oil company Petrobras (PBR).

"Brazil is now the leader in the world for new oil discovery, with finds off its southeastern coast," Weiss says. "And it's a world leader for ethanol production."

Brazil's ethanol industry functions much more rationally than that of the U.S. because, while U.S. ethanol is made from corn — helping to cause a global shortage of corn — Brazil's ethanol is made from sugar cane.

"Brazil's ethanol doesn't drive food prices up, because sugar cane is abundant and not a staple," Weiss says.

Getting back to the Fed, he believes it should be focusing on the supply of money rather than its price. "What it should be doing is regulating the supply of money and let interest rates fall where they may," Weiss says.

He argues, in fact, that high rates actually have a benefit.

"People will save more and be more careful about their money, and that's the way it should be. Instead, the Fed has kept rates down, which led to a housing bubble, and it doesn't want to face the music now that the bubble is popping."

Find out more about Martin Weiss at his Web site, www.martinweiss.com.

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