By Charles Githler, chairman, MoneyShow.com

The worst is over for investors, and an improving environment awaits us in 2012, according to the MoneyShow experts who proved most accurate last year. Nor will the European sovereign debt crisis whipsaw the markets with last year’s ferocity.

The bad news: Our old friend, inflation, is still on its way back.

Its return was our top forecast last year. But the European crisis postponed the comeback, the same way it frustrated predictions for an equities rally, $120 crude, a spike in interest rates, a Chinese boom, and a pickup in mergers.

The euro's weakness helped bear out forecasts for surprising dollar strength and a record gold price, though bullion pulled up well short of the $2,400 per ounce prophesied by our source a year ago.

The call for a rebound in municipal bonds proved spot-on, with the iShares S&P National Municipal ETF (MUB) rallying 18% from its 2011 trough to last week’s peak.

When inflation returns, new market manias will emerge and the engorged bond bubble will pop. Monetarists and sage investors warn this is only a matter of time: "Money supply creation is the definition of inflation," said Nobel laureate Milton Friedman, who keynoted several Money Shows during the 1990s.

The global money-printing spree over the last three years has been nothing short of colossal: $500 billion in China, on top of $1.85 trillion in the U.S. -- which may not be finished -- and $2.6 trillion more is required in Europe, according to economist David Malpass. Malpass still worries about an implosion of the European banking system, which is almost four times larger than its U.S. counterpart.

Matthew Lynn of MarketWatch argues that gold can't lose. Either the European Central Bank gets busy printing currency to finance bulk purchases of ailing sovereign bonds (which have admittedly performed much better recently), or else the euro will suffer a chaotic breakup.

The extra currency is likely to seek out stores of value. And, under the worst-case scenario, money hoarders might also seek to convert their paper into bullion.

The good news: markets expect Europe to avoid a complete financial collapse. The bad news: a wave of inflation and new asset price bubbles is on the way. But that’s tomorrow’s problem (and opportunity). Investors who understand and prepare their portfolios will survive and profit from the coming economic transformation.

The timing of this shift is tricky to predict. Our generational problem -- the massive overhang of public and private debt -- has produced powerful deflationary forces, as in Japan and here during the Great Depression. The excess debt is a heavier burden than the 1970s inflation, and its effects will  be felt for most of this decade.

The 10 market forces:

1. Deflation to inflation

2. Financials finally recover… remember 2009?  

3. Stocks rise… doing what they were expected to last year 

4. Bonds rise, because the U.S. economic recovery is its slowest ever 

5. Balance blue-chip dividend leaders with growth and gold stocks 

6. Income investing goes "mega-trend" in 2012 

7. Political surprises for the economy

8. Interest rates remain lower, for longer, than anyone expects 

9. Intermediate-term loan rates approach a generational bottom 

10. China and Brazil lead BRICs  

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