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Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown
Recovery? What Recovery? Did you lose money in the stock market in the last financial crisis of late 2008? Has your home lost value? Are you "underwater" in your mortgage or concerned about selling? Do your dollars buy less than they used to at the grocery store and the gas pump? Have you lost your job or know someone who did? Are you worried about the safety of your money and investments? Don't Get Fooled Again! While the "experts" want us to believe that all is well (or will be soon), nothing could be further from the truth. The worldwide financial crisis of 2008 and 2009 was just a sneak preview of what is to come. For those who act quickly and correctly, there is still time to protect yourself, your family, and your business in the next global money meltdown. Updated and fully revised, this Second Edition of the Wall Street Journal business bestseller Aftershock can help
320 pages, Hardcover
First published January 1, 2009
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579 people want to read
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Displaying 1 - 30 of 144 reviews
November 16, 2011
I stopped reading this book a little more than half way through. The last straw for me was the recommendation to default on your home loan and credit card debt along with gifting all of your assets before declaring bankruptcy in an effort to protect yourself from loss. This of course was followed by a reminder that what really matters most in life is not money but our own personal integrity and how we interact with others around us. I may not be the sharpest tool in the shed but where is the moral integrity in the counsel to stop paying your mortgage so you can increase your personal savings, meanwhile you force the bank to take the real estate loss when they finally kick you out of the house that you have no intention of paying for? Purchasing his book was a bad investment in this multi-bubble, failing economy.
March 14, 2023
This book makes an interesting case that the real estate market was only one of many economic bubbles to pop. The next two--the dollar and government debt bubbles--will make that one look like a blip by comparison. The prediction: hyper-inflation of 10%+ by the decade's end. This will cause everything to crash all at once. It will be the Great Depression all over again. The only place you're safe is gold and other precious metals, and shorting.
Though an interesting case, it wasn't a very strong one. It certainly made me pay more attention to the huge government debt and reckless money printing by the Fed. I do agree there will be some inflation ahead. 10%? Another Great Depression? Probably not. Maybe it's just wishful thinking, but I'll give you my reasoning.
1. I have a good bullshit alarm, and it was ringing a lot when I read this book. It reads like an infomercial, at least in some places. There are three authors, and maybe only one of them makes me squirm the way a used car salesman does. And whenever I start thinking, "wow, it's going to be tough to find safe investment opportunities in this new economy we'll be in!" I would see a little blurb about their financial planning firm. Probably not a coincidence.
2. I doubt their authority. The book is based on the premise that the whole field of economics is out to lunch, so you shouldn't trust them. Instead, trust these three folks. Wait, who are they again? Oh yeah, the infomercial people trying to sell me their investment advice. Their reasoning: they predicted the first financial meltdown, whereas the economists were dead wrong. That's called anecdotal evidence. One correct prediction is not enough for me to throw away all the investment wisdom I've gotten from academic economists, and trust in three obscure financial planners.
3. Though they differentiate themselves somewhat from the other Chicken Littles like Peter Schiff, they do sound a lot like the loony Austrian school of economics, who insist the sky really is falling if only the government would let it. To some extent, there is sound economic reasoning beneath it--like the dangers of printing money causing rampant inflation. But I understand trade-offs, and I'm quite sure the Fed does too. Healthy markets are based on trust and safety. Panics erode that trust. Do I completely trust the Fed to get it right? No. Do I trust them more than these three clowns? Absolutely.
4. Gold is a bubble too. It's such a bubble that the last couple centuries of gold prices look like a flat line by comparison to the last decade. These authors admit this, but they say that the other bubbles will collapse first. So invest in gold, wait for the other bubbles to pop, let gold really skyrocket, and then get out before everyone else! Except that's probably what "everyone else" will be thinking too. Gold feels much less safe than stocks right now, especially since stocks are productive businesses, whereas gold is just a rock. Maybe there's nowhere safe to put my money except under my mattress. Oh, wait. This hyper-inflation will destroy that too. My bet? The same one economists have been pushing since before economics existed, in fact all the way to the dawn of modern civilization: diversification.
I might be wrong. If I am, I will regrettably eat my words, and will take a long hard look at these Austrian economists. I hope I won't be too busy hoarding food rations to update this review with an apology and a five star rating.
UPDATE (04/15/2020): I originally wrote this review eight years ago, and I said if I was wrong, I would update it with an apology. Well, I was right. The book made predictions about what would happen by 2020, so let's see how they did. The inflation rate is not even close to the 10%+ they predicted. It has held very steady and currently stands at a tiny 1.54%. As for investing in gold, let's see how $10,000 would have done if I'd invested it in gold like they recommended. If I bought SPDR Gold Shares, it would be worth $13,600 today. If I instead bought $10,000 of Vanguard S&P 500 ETF, it would be worth $20,491. That's not even counting the 2.24% dividend rate in the S&P 500, which alone is higher than any savings account.
UPDATE (05/14/2023): Oh, well, hello inflation! But taking the advice in this book would not have done a damn thing to protect an investor. And still waiting for that next global financial meltdown. I still might be wrong.
Though an interesting case, it wasn't a very strong one. It certainly made me pay more attention to the huge government debt and reckless money printing by the Fed. I do agree there will be some inflation ahead. 10%? Another Great Depression? Probably not. Maybe it's just wishful thinking, but I'll give you my reasoning.
1. I have a good bullshit alarm, and it was ringing a lot when I read this book. It reads like an infomercial, at least in some places. There are three authors, and maybe only one of them makes me squirm the way a used car salesman does. And whenever I start thinking, "wow, it's going to be tough to find safe investment opportunities in this new economy we'll be in!" I would see a little blurb about their financial planning firm. Probably not a coincidence.
2. I doubt their authority. The book is based on the premise that the whole field of economics is out to lunch, so you shouldn't trust them. Instead, trust these three folks. Wait, who are they again? Oh yeah, the infomercial people trying to sell me their investment advice. Their reasoning: they predicted the first financial meltdown, whereas the economists were dead wrong. That's called anecdotal evidence. One correct prediction is not enough for me to throw away all the investment wisdom I've gotten from academic economists, and trust in three obscure financial planners.
3. Though they differentiate themselves somewhat from the other Chicken Littles like Peter Schiff, they do sound a lot like the loony Austrian school of economics, who insist the sky really is falling if only the government would let it. To some extent, there is sound economic reasoning beneath it--like the dangers of printing money causing rampant inflation. But I understand trade-offs, and I'm quite sure the Fed does too. Healthy markets are based on trust and safety. Panics erode that trust. Do I completely trust the Fed to get it right? No. Do I trust them more than these three clowns? Absolutely.
4. Gold is a bubble too. It's such a bubble that the last couple centuries of gold prices look like a flat line by comparison to the last decade. These authors admit this, but they say that the other bubbles will collapse first. So invest in gold, wait for the other bubbles to pop, let gold really skyrocket, and then get out before everyone else! Except that's probably what "everyone else" will be thinking too. Gold feels much less safe than stocks right now, especially since stocks are productive businesses, whereas gold is just a rock. Maybe there's nowhere safe to put my money except under my mattress. Oh, wait. This hyper-inflation will destroy that too. My bet? The same one economists have been pushing since before economics existed, in fact all the way to the dawn of modern civilization: diversification.
I might be wrong. If I am, I will regrettably eat my words, and will take a long hard look at these Austrian economists. I hope I won't be too busy hoarding food rations to update this review with an apology and a five star rating.
UPDATE (04/15/2020): I originally wrote this review eight years ago, and I said if I was wrong, I would update it with an apology. Well, I was right. The book made predictions about what would happen by 2020, so let's see how they did. The inflation rate is not even close to the 10%+ they predicted. It has held very steady and currently stands at a tiny 1.54%. As for investing in gold, let's see how $10,000 would have done if I'd invested it in gold like they recommended. If I bought SPDR Gold Shares, it would be worth $13,600 today. If I instead bought $10,000 of Vanguard S&P 500 ETF, it would be worth $20,491. That's not even counting the 2.24% dividend rate in the S&P 500, which alone is higher than any savings account.
UPDATE (05/14/2023): Oh, well, hello inflation! But taking the advice in this book would not have done a damn thing to protect an investor. And still waiting for that next global financial meltdown. I still might be wrong.
April 8, 2012
I don't think I've ever given a one star review before but I will explain why I did here. Well over 85% of this book is a rehash of how awesome they think they were in their first book. The go over in detail chapter by chapter what has happened that they predicted would happen. But it is easy in hind sight to detail how correct they were in great detail. In face in greater detail than they predicted. This book is like someone in the second inning of a baseball game saying the Yankees are going to win then the next day writing a full page newspaper article about all the ways it was easy to see that the Yankees were going to win and going pitch by pitch through the whole game expelling how you knew all along what each pitch would be and saying we knew it all along. Then the book has about 3 chapters predicting the future problems in the broadest fashion. For example they say there are 3 "primary focus of productivity improvements will have to be on our three largest service areas: 1. Health Care. 2 Education and 3. Government". Then they spend exactly 5 paragraphs expounding on that. Not 5 pages, 5 paragraphs! Like another reader said this could have been done as a medium length paper and covered their future recommendations. The other 85% of the book is look how right we were. The 15% that is forward looking is fine but no one buys the book thinking it's a rehash of the past.
September 4, 2011
This is the most important book you will ever read in your life concerning your economic future. Aftershock has affected me profoundly and has completely changed the way I look upon the government, the economy, and the future. It is very specific in its predictions and shows a brutal future for the economic wealth of not only the US but the world starting in the next 3 years and lasting for 20 years longer.
I have purchased 10 copies and sent them to my relatives and close friends. I have never done anything like this before. I doubt any of them will read it (let alone believe it) but I at least gave them the chance to prepare for such a bleak future. I do not want the future of this book to be true but I simply cannot ignore it just to help me sleep at night. I scoffed, resisted, denied, but finally accepted that Aftershock makes the most sense of what I see happening today and what I see will happen in the future.
By no later than 2014 inflation will rise dramatically, the dollar will pretty much collapse as a strong currency,and the national debt (along with the US government) will be in default. The resulting drop in trade, wealth, housing prices, jobs, and business will affect everyone, everywhere.
Are the authors insane? How could they be so cocky in predicting what NO ONE ELSE seems to even think about? Could all the economists, the Fed, the bankers, and the market leaders all be so blind? Yes they can be blind, for we are in a place in history that we have never, ever been before. This is no recession and certainly no "cycle". This is completely new, this is real, this is ugly, and this will happen just as the authors say.
Once I had read the 2nd version for the second time (and the 1st version once), I started to see exactly what the authors are predicting coming true in the headlines daily. I too share the writers disbelief in how narrow people views are (and who should know better) and how they can ignore what is so obvious.
The news writes the story of the coming economic collapse in exactly the same way Aftershock does, but changes the ending to make everything OK so people feel good. NOT ONE politician, journalist, or economist dares to even utter a word about a future where everything will not turn out OK. So many people will be taken completely by surprise by theses experts, leaders, and news-writers failure of their jobs at the most fundamental level. Look how well they warned us about the banking fiasco for an example of how well they do what they are paid to do.
You should read the book. You may not believe a word of it, may laugh at the bizarre predictions, or just ignore the message it gives. That is fine, at least you will be in some way prepared in case it unexpectedly comes true. If you, like me, find the story rings alarm bells, you can even plan ahead for this bleak future. The worst decision would be to not read the book and be blindsided with all the economic pain and suffering for you and your family.
I have purchased 10 copies and sent them to my relatives and close friends. I have never done anything like this before. I doubt any of them will read it (let alone believe it) but I at least gave them the chance to prepare for such a bleak future. I do not want the future of this book to be true but I simply cannot ignore it just to help me sleep at night. I scoffed, resisted, denied, but finally accepted that Aftershock makes the most sense of what I see happening today and what I see will happen in the future.
By no later than 2014 inflation will rise dramatically, the dollar will pretty much collapse as a strong currency,and the national debt (along with the US government) will be in default. The resulting drop in trade, wealth, housing prices, jobs, and business will affect everyone, everywhere.
Are the authors insane? How could they be so cocky in predicting what NO ONE ELSE seems to even think about? Could all the economists, the Fed, the bankers, and the market leaders all be so blind? Yes they can be blind, for we are in a place in history that we have never, ever been before. This is no recession and certainly no "cycle". This is completely new, this is real, this is ugly, and this will happen just as the authors say.
Once I had read the 2nd version for the second time (and the 1st version once), I started to see exactly what the authors are predicting coming true in the headlines daily. I too share the writers disbelief in how narrow people views are (and who should know better) and how they can ignore what is so obvious.
The news writes the story of the coming economic collapse in exactly the same way Aftershock does, but changes the ending to make everything OK so people feel good. NOT ONE politician, journalist, or economist dares to even utter a word about a future where everything will not turn out OK. So many people will be taken completely by surprise by theses experts, leaders, and news-writers failure of their jobs at the most fundamental level. Look how well they warned us about the banking fiasco for an example of how well they do what they are paid to do.
You should read the book. You may not believe a word of it, may laugh at the bizarre predictions, or just ignore the message it gives. That is fine, at least you will be in some way prepared in case it unexpectedly comes true. If you, like me, find the story rings alarm bells, you can even plan ahead for this bleak future. The worst decision would be to not read the book and be blindsided with all the economic pain and suffering for you and your family.
April 2, 2020
Written a few years ago, Aftershock can now be described as prophetic, as we begin to see the 2020 bursting of the credit bubble. While everyone observes the devastating economic impacts of the Corona Virus, I believe that few have anticipated what is yet to come. History books will show that the "lockdown" was simply a catalyst for the ensuing credit crisis and recession. This book describes the current precarious financial condition of US corporations, which used excessive leverage over the last few years to buyback their stocks in order to reward management with stock options, leaving these companies vulnerable to Black Swan events such as CV19.
I felt that the book painted a fairly accurate picture. My only criticism is that I was hoping for a little more specifics as to how to protect against the roller-coaster deflationary/inflationary ride we are about to experience. There was a brief discussion about investing in real assets, such as commodities, etc. But in fairness to the authors, there truly will be very few places to hide if these dire predictions occur.
I felt that the book painted a fairly accurate picture. My only criticism is that I was hoping for a little more specifics as to how to protect against the roller-coaster deflationary/inflationary ride we are about to experience. There was a brief discussion about investing in real assets, such as commodities, etc. But in fairness to the authors, there truly will be very few places to hide if these dire predictions occur.
November 8, 2011
With a couple of exceptions I disagree with most of what this book espouses, mostly the modern fable that economics should be a hard science of technical reason. This is delusional. Counting is scientific, but the minute you get people and psychology involved you move into the fetid swamp of human behavior and no mathematical data set is going to be able to predict that.
Also, the arguments in this book helped drag me into agreement that gold is valuable, though I hate the entire model and history of gold investment. There's no denying that gold is dead useful. I'm still not going to invest in it. Not right now, anyway.
I started off not wanting to like this book and in the end I still didn't like it. That said, this book has some reasonable arguments, it presents a different perspective than the norm, which I value, and I liked that they advocate squatting property sometimes.
Also, the arguments in this book helped drag me into agreement that gold is valuable, though I hate the entire model and history of gold investment. There's no denying that gold is dead useful. I'm still not going to invest in it. Not right now, anyway.
I started off not wanting to like this book and in the end I still didn't like it. That said, this book has some reasonable arguments, it presents a different perspective than the norm, which I value, and I liked that they advocate squatting property sometimes.
January 30, 2012
The author's analysis of the current Bubble Economy is compelling. They don't hold out any hope for good times ahead, although they have ethically suspect recommendations for individual protection & prosperity in the coming debacle. Their argument, however, could have been condensed into a medium-length article. The constant repetition of points already made, & a fair amount of self-congratulatory "we got it right the first time, so you should trust us now" rhetoric becomes, finally, more annoying than instructive.
Interesting in light of Obama's 2012 State of the Union speech with its emphasis upon productivity. Authors claim that only "real" growth can soften the bursting of the final of 4 economic bubbles to burst (real estate & stocks in 2008; US dollar & debt on the horizon). They expect too little too late, however (a bit like mitigating the consequences of Global Warming or Climate Change). Neither the authors nor the President, however, speak to environmental limiting factors to Growth. To my mind, these remain the elephant in the room that no one fully acknowledges. A capitalist (even a communist) economy is predicated on growth, not sustainability. Continuing increases in GDP require either more consumption by existing populations (since there must be an upper limit to need, even perhaps to want, such increases necessarily must reach an end, where all needs are met, where consumption reaches its saturation point) or continual increases in global population that would create new consumers (here we run into the carrying capacity, however defined, of the planet). According to some, at 7 billion world population we've already exceeded the Earth's carrying capacity by as much as 5 billion!
In the short term, increased consumption can arise from more equitable distribution of income and wealth, which would create billions of "new" consumers. Also, "new" products to meet infrastructure & "clean" energy demands might impact both demand for goods and somewhat mitigate environmental damage. The risk of environmental collapse won't go away however. In the long term, we have to move from growth to sustainability, from population increase to population decrease (unless, as some suggest, we develop the capacity to colonize another planet).
Interesting in light of Obama's 2012 State of the Union speech with its emphasis upon productivity. Authors claim that only "real" growth can soften the bursting of the final of 4 economic bubbles to burst (real estate & stocks in 2008; US dollar & debt on the horizon). They expect too little too late, however (a bit like mitigating the consequences of Global Warming or Climate Change). Neither the authors nor the President, however, speak to environmental limiting factors to Growth. To my mind, these remain the elephant in the room that no one fully acknowledges. A capitalist (even a communist) economy is predicated on growth, not sustainability. Continuing increases in GDP require either more consumption by existing populations (since there must be an upper limit to need, even perhaps to want, such increases necessarily must reach an end, where all needs are met, where consumption reaches its saturation point) or continual increases in global population that would create new consumers (here we run into the carrying capacity, however defined, of the planet). According to some, at 7 billion world population we've already exceeded the Earth's carrying capacity by as much as 5 billion!
In the short term, increased consumption can arise from more equitable distribution of income and wealth, which would create billions of "new" consumers. Also, "new" products to meet infrastructure & "clean" energy demands might impact both demand for goods and somewhat mitigate environmental damage. The risk of environmental collapse won't go away however. In the long term, we have to move from growth to sustainability, from population increase to population decrease (unless, as some suggest, we develop the capacity to colonize another planet).
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June 3, 2013Hmmm. Well, I wasn't real thrilled about the 'you can call our investment firm for help on how to handle your money during the upcoming hellish times' advertising aspect, but...
It's a sad comment on just how pessimistic I feel about the financial state of this country that Aftershock actually seemed LESS gloomy than I'd expected. Granted, they are forecasting the bursting of the dollar and government debt bubbles, the destruction of the dollar as the world's reserve currency, double digit inflation and interest rates, a potential 90% drop in the value of the stock market, etc. But the fact that they specifically do NOT predict hyper (cash-in-a-wheelbarrow) inflation or, you know, blood running in the streets gave my spirits rather a lift.
The 'bubble' charts they include are pretty damning. Amazing to see things like the real estate price index laid out on a chart covering a century and to see the incredible (seriously--incredible) spike stabbing upward as you approach the '00s. Too bad that the charts showing our federal debt and our money supply demonstrate the exact same spike. And then there's that chart showing that the stock market for the past few years follows the bouts of quantitative easing up and down like the most obedient lap dog in the world. Disturbing.
It's a sad comment on just how pessimistic I feel about the financial state of this country that Aftershock actually seemed LESS gloomy than I'd expected. Granted, they are forecasting the bursting of the dollar and government debt bubbles, the destruction of the dollar as the world's reserve currency, double digit inflation and interest rates, a potential 90% drop in the value of the stock market, etc. But the fact that they specifically do NOT predict hyper (cash-in-a-wheelbarrow) inflation or, you know, blood running in the streets gave my spirits rather a lift.
The 'bubble' charts they include are pretty damning. Amazing to see things like the real estate price index laid out on a chart covering a century and to see the incredible (seriously--incredible) spike stabbing upward as you approach the '00s. Too bad that the charts showing our federal debt and our money supply demonstrate the exact same spike. And then there's that chart showing that the stock market for the past few years follows the bouts of quantitative easing up and down like the most obedient lap dog in the world. Disturbing.
December 31, 2011
Ugh. First off, when you want to know the truth or hear "scientifically backed" predictions of the future, don't go to a salesman. Shamelessly after the end of multiple chapters they would end it by telling you to buy their financial services.
I only made it through chapter 3. Here are the three strikes.
Predicted inflation solely on the basis that Money Supply has been increasing without regard of the other economic forces that counter act a rise in Money supply. Remember the equation from your macroecon class. MV=PY.
The amount that they cited the Money Supply being raised by the first Quantitative Easing. They said it went from 8B to 2.4T. The Fed's stats are 1.4T to 2.2T. And that is over the course of the whole crisis, not just QE1.
Last they claimed that the Money Supply has ballooned in the past decade. They graph they used used the Monetary Base. The Monetary Base is only a fraction of the Money Supply and therefore, paints an inaccurate picture of what is happening on the whole.
There, that is my rant. I read it because my sister-in-law was interested in it.
I only made it through chapter 3. Here are the three strikes.
Predicted inflation solely on the basis that Money Supply has been increasing without regard of the other economic forces that counter act a rise in Money supply. Remember the equation from your macroecon class. MV=PY.
The amount that they cited the Money Supply being raised by the first Quantitative Easing. They said it went from 8B to 2.4T. The Fed's stats are 1.4T to 2.2T. And that is over the course of the whole crisis, not just QE1.
Last they claimed that the Money Supply has ballooned in the past decade. They graph they used used the Monetary Base. The Monetary Base is only a fraction of the Money Supply and therefore, paints an inaccurate picture of what is happening on the whole.
There, that is my rant. I read it because my sister-in-law was interested in it.
September 20, 2015
Very interesting read, and certainly an eye opener. I do think it's very difficult to predict macroeconomics, and just because they got it right once doesn't necessarily mean they will continue to be right. The way they repeated that many times ("you better listen to us this time") was annoying.
That being said, I don't think this book should be disregarded - I would definitely recommend it to others. I think the authors make a lot of valid points that appear to ring true. Particularly the argument that our economy is evolving, as opposed to simply repeating itself in a perpetual cycle. I also believe that we can't get something for nothing - at least not in a sustainable way. It has been evident that we have been cutting corners and putting off the inevitable. Now it's time to pay the piper. Should be interesting in the upcoming years. On the other hand, I am actually excited to see how the international economy eventually rights itself. I hope the authors' optimism for the long-term holds true.
That being said, I don't think this book should be disregarded - I would definitely recommend it to others. I think the authors make a lot of valid points that appear to ring true. Particularly the argument that our economy is evolving, as opposed to simply repeating itself in a perpetual cycle. I also believe that we can't get something for nothing - at least not in a sustainable way. It has been evident that we have been cutting corners and putting off the inevitable. Now it's time to pay the piper. Should be interesting in the upcoming years. On the other hand, I am actually excited to see how the international economy eventually rights itself. I hope the authors' optimism for the long-term holds true.
November 1, 2011
This is quite possibly the most important book that any layman can read today, about the future of America and the world's economies. There is little doubt that what is being said in this book will come to fruition. In their last book, they called the real estate and debt collapse of 2007 and 2008 with stunning accuracy, back in 2006! But as I and many others have thought, what happened in 2007 and 2008 was only but a tremor of the massive economic earthquake en route, which is the end of the debt supercycle. If you value your own financial well being, especially if you have a family to take care of, read Aftershock. It's one of those things where should you fail to do so, then you truly deserve what you get for ignoring these warnings, yet again. No one can afford to be ill prepared for the next economic quake.
August 26, 2013
Extremely Smart Rhetoric — But Not Smart Enough Science
I have to hand it to the authors of Aftershock: they can hammer a point across. This work was certainly written by one smart, little gang, and it is hard to argue their success. While I do agree with the book’s general view that a series of bubbles could pop and send the world’s economy into a vicious cycle, I am not so sure about the reliability of its methods or of its predictions. First off, any economist that claims to understand the economy is a charlatan. Anyone who claims to predict the path of economies years out cannot be taken seriously. Secondly, the book omits that governments, in particular the American, could indeed do something to deliberately deflate some or all of the bubbles. However, the authors display an unusual and at times entertaining level of street-smarts that bring forth real-world solutions and prudent advice. They even recognize that life should be in the center of human priorities and that it goes on even without money. For these last points, the book deserves 5 stars despite of its fundamental shortcomings.
This group of economists recognizes the profession of ours as being focused on “expert” economic issues while the big picture (of growth) is poorly understood, if at all. Unfortunately, it is discouraging to see the same group taking conventional wisdom to explain economic “breakthroughs” of the past. It crosses into the bizarre, when an author like Marx is given an A for effort and an F for results. This is because the authors obviously did neither study the Communist Manifesto nor the Capital, let alone the socio-economic context of Marx’s intellectual framework. All of the authors’ quoted breakthrough ideas are nothing other than dogmas of political economics, not breakthroughs or science. They pretend that the understanding of capital and interest is some sort of a modern idea. Obviously, they did not study the Bible either. The ideas of capital and its deployment for interest has made little progress for the last thousand years, or so. Since then, high finance and derivative instruments were widely used, and their destructive consequences were probably understood by those that had invented them. Apparently, the authors also have no understanding that monetary policies are mere superstitions, which only work as everyone else is a follower, or a believer, one should say. In other words, unlike the authors that long for the next big idea (i.e. dogma), this reviewer — one of the few surviving “responsible Capitalists” — stands for beginning all over, questioning the dogmas of free markets (an experiment that has not yet been conducted anywhere despite of what we are told and what we might like to believe) or of supply and demand equilibriums on which the modern and false mathematical models are founded. Today, there is no recipe for which monetary or fiscal option to choose in order to weather a storm or drive the economy from one trajectory onto another. If it were otherwise, there would be no political gridlock but only experts that could tell to pick this in order for that to happen. Most other experts would then be able to duplicate the logic of the authors and react to what they see in an orderly fashion. In fact, the one thing economists can easily verify is that their monetary models work! However, they lead to the expected result only for those failing to ask what would happen next. Just one step further, and then another, their own models would quickly duplicate that the end result would near a zero-sum game. Any half-baked student of economics for beginners could disprove the theory on less than six pages. As the authors say, there is no such thing as science, today, in economics, only political expediency and protection of chairs and retirement plans. Hence, this reviewer agrees with the authors that a paradigm shift is needed from philosophical economics to science, but again, disagrees with the authors of how to get there. They do not even mention competition, herd behavior or the effect of experience (as the antonym of the authors’ concept of not wanting to face facts) as one of their four economic key elements to a new approach (they would like to explore the learning process, but the decades old theory of memes should help to advance their thinking). Maybe big data, their forth element, or our aggregate minds will change economics eventually. But first, we have to raise the next generation that will understand it and command over reliable data of the past to run successful simulations. The authors are silent about the lack of historical data on which such models could be built and also about the fact that economies are inherently unstable and under constant fire of attempted disruptions. If it is impossible to predict what the next boom-bust technology will be, then it is also impossible to predict where the economy is heading in the long run. The authors think that the economy could be more like the weather without a static equilibrium but with a dynamic one. Scientific economics and the authors will eventually have to recognize that there is no such thing as equilibrium — period. Even their idea of evolving economics is not new or any better. This reviewer had the privilege to study under one of the great pioneers of evolutionary economics over twenty years ago. This theory still rests on the fundamental flaws of the previous ones. All these ideas have one thing in common: they all worked — until they did not work. What bothers this reviewer is that the authors undermine their own credibility by praising ideologies that were not based on any science, but turned out as false. Yet, it seems that the authors show an insecure flip-flopping between the praise and the view of Mark Twain that there are lies, damn lies, and statistics in the service of political titans in deviously conceived attacks on the taxpayers’ wallets. They call for one savior to come and ask the right questions — but only half-heartedly because they like to see themselves in this lofty position. They ask for new blood (even in other sciences such as physics, biology, and geology) to solve the fundamental puzzles — but they maintain that this is increasingly impossible, except for them, it seems. The fools are those that make the same mistakes twice (or perpetuate them), and here I wholeheartedly agree with the brainy team. But how convenient! Criticizing is easy and can be seen the world over, but bringing forth something new and ingenious is an entirely different story. Their wailing against their own is old news and no longer an insider joke. These sidekicks or afterthoughts — although quite entertainingly presented — are off topic in the context of the Aftershock other than filling more pages, and they are way out of their league.
The authors are obsessed with bubbles and their catastrophic implosion in a global mega-money meltdown. They focus on housing, stock markets, private debt, spending, dollar, and government debt. Compared to many other countries, housing in America has been cheap before 2008 and has become even cheaper now. While the authors focus on more downward pressure on the housing market due to inflation and rising interest rates, neither of the two needs to obligatorily come through. Switzerland, for example, has had high real estate prices for at least four decades. What the authors could call a housing bubble has been kept in check by low interest rates and no inflation. Certainly, housing prices will deflate if interest rates go up. Any rate increase will directly cut into the disposable income of households with flexible rates and potentially overwhelm it. This economic dream scenario, where one factor has been almost “fixed” for so long, lures the economic community into believing that their analytical methods are of any value — including the authors’ own ideas. Simply put, at an interest rate of 5% and a disposable income of $10,000 per annum, $200,000 can be capitalized, representing the potential home value. At an interest rate of 10% and a disposable income at still $10,000 per year only $100,000 can be capitalized. The same money that afforded a villa before, now can only buy a shack unless the price of the villa collapses with the rate increase, however, unless the aggregate factor of income changes, it still costs $200,000 to replace the villa, and the theoretical framework continues to be fundamentally flawed. The problem is not, as the authors recognize, rising real estate prices alone but rather the imbalance that has been created during three decades of stagnating wages AND real estate inflation. However, while the authors end there, real life moves on and finds new ways to deal with problems, even if they are not understood. By sheer numbers, seven billion of us demonstrate quite well what success despite the absence of knowledge means. For example, raising the minimum wage in America for “controlled” wage inflation and keeping interest low could indeed ease said imbalance — at least as an experimental thought. Subsidized variable to fixed rate mortgage swaps or interest spread caps would be other and safer examples of possible government actions.
The stock market has also been inflated for at least three decades since the introduction of “securities” has blown any prudence into the wind. Before, the value of a stock would be based on its performance and potential for leverage. Now, stocks are not unlike tulip bulbs from back in the seventeenth century. I agree with the authors, who even factored in the possibility that stocks could climb sky high again before collapsing (of course, this review is written from the top of the mountain). However, this is mainly fueled by the lack of alternatives, a factor in investor psychology that the authors do not seem to recognize. I also agree that a significant stock market correction is now just around the corner, possibly one or two months out (nobody will notice if this reviewer is wrong). All it takes is a trigger event to break the dam, possibly a high-speed trade (i.e. criminal insider trade) gone wild. However, stocks are not real estate. They are liquid means and, that is most important, mainly virtual, i.e. not real. If an investor, who should by definition be among the haves, bought stock at DJ 7500, it doubled in five years and then suddenly crashed to 8000, the stock owner did not lose anything other than the opportunity to a large profit. It is true, the sentiment and self-esteem is devastated and the potential to consume or reinvest more has just waned. But other than being bad for the psyche, nothing happened — in the aggregate view of the matter. The DJ could certainly fall below this point when aggregate losses would materialize through real aggregate transactions. If they did not leverage their wealth, they have less, but they are still among the haves. Those that did leverage, jump out the window, if they are dumb enough, or take action, declare bankruptcy, and walk away with a clean slate. The smart ones will return to rebuilding their wealth at once. That is what industrious humans do. There will be lots of small investors hurt that hopped on the train too late, of course. My advice to those is simple: If you cannot take the pain, stay out of the game. The authors’ advice is different, more elaborate, and justly based on prudence.
The more troubling issue with stocks is securitization, a factor that the authors do not seem to think being a big deal. They even think that the idea that securities could have taken down the economy is plain out wrong. A look at Greenspan’s interest rate manipulations would answer this question decisively as it was his efforts to cooling an overheated economy with direct rate hikes that triggered millions of homeowners defaulting on their mortgages. The time lag clearly shows the rising troubles with the securities and the financial dinosaurs that fell were those that could not deliver on asset calls that were triggered by securities. Given that nothing has fundamentally changed in the regulations since 2008, these can rapidly undermine the entire global financial system again if only one of the bigger players fails to deliver on its promises. The authors’ advice to invest in options (i.e. securities) is flat-out wrong. It is often forgotten that securities, despite their name, are of the most insecure investments out there, and that they are fully dependent on the underwriter’s capability to pay up when the market plays outside of the oscillations predicted in their mathematical models. In other words, the stock market bubble of the authors is irrelevant; the thousand-fold securities bubble behind the stocks is where the monster looms. Whoever believes in the Aftershock’s scenario of multiple bubbles popping should not invest into securities. In this case, governments would be overwhelmed by trying to bail out the institutions that issued them, and the authors’ predictions are contradictory and illogical.
Private debt has long been astonishing. How could an entire nation be foolish enough to refuse to save a single penny and instead perpetually return to spending as much or even more than they earn? Here, America is set apart from much of the rest of the world. Oddly enough, this strange behavior is at the foundation of the strength of America’s economy: it keeps the rat race going. Private households that find themselves in trouble have options, and some of the authors’ recommendations are street-smart and realistic, and it is here where the five stars are merited. First and foremost, anyone can opt out at any time to wait and see what happens. The government could and should prevent catastrophic fallout from a private debt collapse by banning floating interest for existing debt and by putting an interest spread cap on new private debt, for example. Even better, they could simply fix the prime rate and do away with speculation altogether. Financial institutions can always securitize (!) against floating rates. Here again, private debt is not so much a problem as the securitization (!!) behind it is, which led to irresponsible habits in banking, for example fat cat bonuses absent of any merit. If excessive lending would be regulated as unenforceable, smarter lending would lead to less systemic risk at the price of not so vigorous growth potentials. In addition, it is interesting that the authors do not seem to recognize corporate leverage as a much more fundamental issue than private debt. There, the absence of growth or a contraction has devastating effects on jobs, and a large player’s problems can cascade through the entire economy. Before the collapse in 2008, I had made a recommendation to my employees to refinance into fixed rate mortgages. While I agree with the authors’ recommendations on real estate debt, my employees have paid dearly for this safety. I am sure that these authors’ readership has a thing or two to say about their mortgage cost during these past five years, and the verdict is still out whether or not it was worth it.
A whole different issue is government debt, which is in this review bundled together with government spending. The authors claim that the United States will inevitably default on its debt. However, they seem to fail to recognize that humans are ingenious in cheating their way out of all sorts of tight spots (again, try to argue success story of the human journey). For example, a 0% super-bulk refinancing of government debt could push the imminent collapse 30 years out. With a couple of points in inflation, the debt would eat itself away before maturity. Another is by simply not telling the truth about the gravity of the situation, and the authors hint at that possibility. It seems that the authors are among a surprisingly small number of economists which recognize that the “recovery” is in deficit spending and government debt. In the absence of this, the American economy would have contracted substantially. The really interesting question is what will happen with interest rates since many countries that used to engage in austerity are now back to government spending on more debt. Will it trigger the monster of overwhelming debt servicing? The authors cannot stand up and claim to know what will happen next without making a fool of themselves.
The Aftershock’s escapades about the value of the dollar are prophetic, and thus not worth commenting on. As anyone else, they have not the slightest clue.
In the end of all said, while there are always options, I agree with the authors that government action may come too late and the ones now taken are in fact increasing the odds of a collapse down the road. However, neither the authors nor this reviewer know what actions will be taken when governments are faced with a cliff. Will we jump? Will we build a bridge? Or will we simply drive down and up again on the other side? Quite obviously, there are many ways to address a problem and the quiz would bring forth many options more.
For those still in need of a wakeup call, Aftershock is well worth the time. For their tips of prudence alone, this book deserves five stars. Despite their call to securities (to which many smart investors are averse), this is its strong point, and this reviewer is inclined to turn a blind eye on the overwhelming weak points because they differ little from common economic wisdom. Some of their predictions have come true, somewhat, but they are based on pretensions, speculation, or prophesy, not science or better analytical knowledge. After all, humans ignore all facts when inconvenient. My recommendation to the authors: stay away from economics and focus on the strengths: investment advice.
So, will there be an aftershock? Of course! Rule Nr. 1 is that all bubbles eventually pop. When and how big? Nobody has the slightest clue.
A.J. Deus
Social Economics of poverty
For an antithesis on the Aftershock’s ideas about the debt bubble see Debt Crisis – What Crisis? at www.ajdeus.org/articles/472
I have to hand it to the authors of Aftershock: they can hammer a point across. This work was certainly written by one smart, little gang, and it is hard to argue their success. While I do agree with the book’s general view that a series of bubbles could pop and send the world’s economy into a vicious cycle, I am not so sure about the reliability of its methods or of its predictions. First off, any economist that claims to understand the economy is a charlatan. Anyone who claims to predict the path of economies years out cannot be taken seriously. Secondly, the book omits that governments, in particular the American, could indeed do something to deliberately deflate some or all of the bubbles. However, the authors display an unusual and at times entertaining level of street-smarts that bring forth real-world solutions and prudent advice. They even recognize that life should be in the center of human priorities and that it goes on even without money. For these last points, the book deserves 5 stars despite of its fundamental shortcomings.
This group of economists recognizes the profession of ours as being focused on “expert” economic issues while the big picture (of growth) is poorly understood, if at all. Unfortunately, it is discouraging to see the same group taking conventional wisdom to explain economic “breakthroughs” of the past. It crosses into the bizarre, when an author like Marx is given an A for effort and an F for results. This is because the authors obviously did neither study the Communist Manifesto nor the Capital, let alone the socio-economic context of Marx’s intellectual framework. All of the authors’ quoted breakthrough ideas are nothing other than dogmas of political economics, not breakthroughs or science. They pretend that the understanding of capital and interest is some sort of a modern idea. Obviously, they did not study the Bible either. The ideas of capital and its deployment for interest has made little progress for the last thousand years, or so. Since then, high finance and derivative instruments were widely used, and their destructive consequences were probably understood by those that had invented them. Apparently, the authors also have no understanding that monetary policies are mere superstitions, which only work as everyone else is a follower, or a believer, one should say. In other words, unlike the authors that long for the next big idea (i.e. dogma), this reviewer — one of the few surviving “responsible Capitalists” — stands for beginning all over, questioning the dogmas of free markets (an experiment that has not yet been conducted anywhere despite of what we are told and what we might like to believe) or of supply and demand equilibriums on which the modern and false mathematical models are founded. Today, there is no recipe for which monetary or fiscal option to choose in order to weather a storm or drive the economy from one trajectory onto another. If it were otherwise, there would be no political gridlock but only experts that could tell to pick this in order for that to happen. Most other experts would then be able to duplicate the logic of the authors and react to what they see in an orderly fashion. In fact, the one thing economists can easily verify is that their monetary models work! However, they lead to the expected result only for those failing to ask what would happen next. Just one step further, and then another, their own models would quickly duplicate that the end result would near a zero-sum game. Any half-baked student of economics for beginners could disprove the theory on less than six pages. As the authors say, there is no such thing as science, today, in economics, only political expediency and protection of chairs and retirement plans. Hence, this reviewer agrees with the authors that a paradigm shift is needed from philosophical economics to science, but again, disagrees with the authors of how to get there. They do not even mention competition, herd behavior or the effect of experience (as the antonym of the authors’ concept of not wanting to face facts) as one of their four economic key elements to a new approach (they would like to explore the learning process, but the decades old theory of memes should help to advance their thinking). Maybe big data, their forth element, or our aggregate minds will change economics eventually. But first, we have to raise the next generation that will understand it and command over reliable data of the past to run successful simulations. The authors are silent about the lack of historical data on which such models could be built and also about the fact that economies are inherently unstable and under constant fire of attempted disruptions. If it is impossible to predict what the next boom-bust technology will be, then it is also impossible to predict where the economy is heading in the long run. The authors think that the economy could be more like the weather without a static equilibrium but with a dynamic one. Scientific economics and the authors will eventually have to recognize that there is no such thing as equilibrium — period. Even their idea of evolving economics is not new or any better. This reviewer had the privilege to study under one of the great pioneers of evolutionary economics over twenty years ago. This theory still rests on the fundamental flaws of the previous ones. All these ideas have one thing in common: they all worked — until they did not work. What bothers this reviewer is that the authors undermine their own credibility by praising ideologies that were not based on any science, but turned out as false. Yet, it seems that the authors show an insecure flip-flopping between the praise and the view of Mark Twain that there are lies, damn lies, and statistics in the service of political titans in deviously conceived attacks on the taxpayers’ wallets. They call for one savior to come and ask the right questions — but only half-heartedly because they like to see themselves in this lofty position. They ask for new blood (even in other sciences such as physics, biology, and geology) to solve the fundamental puzzles — but they maintain that this is increasingly impossible, except for them, it seems. The fools are those that make the same mistakes twice (or perpetuate them), and here I wholeheartedly agree with the brainy team. But how convenient! Criticizing is easy and can be seen the world over, but bringing forth something new and ingenious is an entirely different story. Their wailing against their own is old news and no longer an insider joke. These sidekicks or afterthoughts — although quite entertainingly presented — are off topic in the context of the Aftershock other than filling more pages, and they are way out of their league.
The authors are obsessed with bubbles and their catastrophic implosion in a global mega-money meltdown. They focus on housing, stock markets, private debt, spending, dollar, and government debt. Compared to many other countries, housing in America has been cheap before 2008 and has become even cheaper now. While the authors focus on more downward pressure on the housing market due to inflation and rising interest rates, neither of the two needs to obligatorily come through. Switzerland, for example, has had high real estate prices for at least four decades. What the authors could call a housing bubble has been kept in check by low interest rates and no inflation. Certainly, housing prices will deflate if interest rates go up. Any rate increase will directly cut into the disposable income of households with flexible rates and potentially overwhelm it. This economic dream scenario, where one factor has been almost “fixed” for so long, lures the economic community into believing that their analytical methods are of any value — including the authors’ own ideas. Simply put, at an interest rate of 5% and a disposable income of $10,000 per annum, $200,000 can be capitalized, representing the potential home value. At an interest rate of 10% and a disposable income at still $10,000 per year only $100,000 can be capitalized. The same money that afforded a villa before, now can only buy a shack unless the price of the villa collapses with the rate increase, however, unless the aggregate factor of income changes, it still costs $200,000 to replace the villa, and the theoretical framework continues to be fundamentally flawed. The problem is not, as the authors recognize, rising real estate prices alone but rather the imbalance that has been created during three decades of stagnating wages AND real estate inflation. However, while the authors end there, real life moves on and finds new ways to deal with problems, even if they are not understood. By sheer numbers, seven billion of us demonstrate quite well what success despite the absence of knowledge means. For example, raising the minimum wage in America for “controlled” wage inflation and keeping interest low could indeed ease said imbalance — at least as an experimental thought. Subsidized variable to fixed rate mortgage swaps or interest spread caps would be other and safer examples of possible government actions.
The stock market has also been inflated for at least three decades since the introduction of “securities” has blown any prudence into the wind. Before, the value of a stock would be based on its performance and potential for leverage. Now, stocks are not unlike tulip bulbs from back in the seventeenth century. I agree with the authors, who even factored in the possibility that stocks could climb sky high again before collapsing (of course, this review is written from the top of the mountain). However, this is mainly fueled by the lack of alternatives, a factor in investor psychology that the authors do not seem to recognize. I also agree that a significant stock market correction is now just around the corner, possibly one or two months out (nobody will notice if this reviewer is wrong). All it takes is a trigger event to break the dam, possibly a high-speed trade (i.e. criminal insider trade) gone wild. However, stocks are not real estate. They are liquid means and, that is most important, mainly virtual, i.e. not real. If an investor, who should by definition be among the haves, bought stock at DJ 7500, it doubled in five years and then suddenly crashed to 8000, the stock owner did not lose anything other than the opportunity to a large profit. It is true, the sentiment and self-esteem is devastated and the potential to consume or reinvest more has just waned. But other than being bad for the psyche, nothing happened — in the aggregate view of the matter. The DJ could certainly fall below this point when aggregate losses would materialize through real aggregate transactions. If they did not leverage their wealth, they have less, but they are still among the haves. Those that did leverage, jump out the window, if they are dumb enough, or take action, declare bankruptcy, and walk away with a clean slate. The smart ones will return to rebuilding their wealth at once. That is what industrious humans do. There will be lots of small investors hurt that hopped on the train too late, of course. My advice to those is simple: If you cannot take the pain, stay out of the game. The authors’ advice is different, more elaborate, and justly based on prudence.
The more troubling issue with stocks is securitization, a factor that the authors do not seem to think being a big deal. They even think that the idea that securities could have taken down the economy is plain out wrong. A look at Greenspan’s interest rate manipulations would answer this question decisively as it was his efforts to cooling an overheated economy with direct rate hikes that triggered millions of homeowners defaulting on their mortgages. The time lag clearly shows the rising troubles with the securities and the financial dinosaurs that fell were those that could not deliver on asset calls that were triggered by securities. Given that nothing has fundamentally changed in the regulations since 2008, these can rapidly undermine the entire global financial system again if only one of the bigger players fails to deliver on its promises. The authors’ advice to invest in options (i.e. securities) is flat-out wrong. It is often forgotten that securities, despite their name, are of the most insecure investments out there, and that they are fully dependent on the underwriter’s capability to pay up when the market plays outside of the oscillations predicted in their mathematical models. In other words, the stock market bubble of the authors is irrelevant; the thousand-fold securities bubble behind the stocks is where the monster looms. Whoever believes in the Aftershock’s scenario of multiple bubbles popping should not invest into securities. In this case, governments would be overwhelmed by trying to bail out the institutions that issued them, and the authors’ predictions are contradictory and illogical.
Private debt has long been astonishing. How could an entire nation be foolish enough to refuse to save a single penny and instead perpetually return to spending as much or even more than they earn? Here, America is set apart from much of the rest of the world. Oddly enough, this strange behavior is at the foundation of the strength of America’s economy: it keeps the rat race going. Private households that find themselves in trouble have options, and some of the authors’ recommendations are street-smart and realistic, and it is here where the five stars are merited. First and foremost, anyone can opt out at any time to wait and see what happens. The government could and should prevent catastrophic fallout from a private debt collapse by banning floating interest for existing debt and by putting an interest spread cap on new private debt, for example. Even better, they could simply fix the prime rate and do away with speculation altogether. Financial institutions can always securitize (!) against floating rates. Here again, private debt is not so much a problem as the securitization (!!) behind it is, which led to irresponsible habits in banking, for example fat cat bonuses absent of any merit. If excessive lending would be regulated as unenforceable, smarter lending would lead to less systemic risk at the price of not so vigorous growth potentials. In addition, it is interesting that the authors do not seem to recognize corporate leverage as a much more fundamental issue than private debt. There, the absence of growth or a contraction has devastating effects on jobs, and a large player’s problems can cascade through the entire economy. Before the collapse in 2008, I had made a recommendation to my employees to refinance into fixed rate mortgages. While I agree with the authors’ recommendations on real estate debt, my employees have paid dearly for this safety. I am sure that these authors’ readership has a thing or two to say about their mortgage cost during these past five years, and the verdict is still out whether or not it was worth it.
A whole different issue is government debt, which is in this review bundled together with government spending. The authors claim that the United States will inevitably default on its debt. However, they seem to fail to recognize that humans are ingenious in cheating their way out of all sorts of tight spots (again, try to argue success story of the human journey). For example, a 0% super-bulk refinancing of government debt could push the imminent collapse 30 years out. With a couple of points in inflation, the debt would eat itself away before maturity. Another is by simply not telling the truth about the gravity of the situation, and the authors hint at that possibility. It seems that the authors are among a surprisingly small number of economists which recognize that the “recovery” is in deficit spending and government debt. In the absence of this, the American economy would have contracted substantially. The really interesting question is what will happen with interest rates since many countries that used to engage in austerity are now back to government spending on more debt. Will it trigger the monster of overwhelming debt servicing? The authors cannot stand up and claim to know what will happen next without making a fool of themselves.
The Aftershock’s escapades about the value of the dollar are prophetic, and thus not worth commenting on. As anyone else, they have not the slightest clue.
In the end of all said, while there are always options, I agree with the authors that government action may come too late and the ones now taken are in fact increasing the odds of a collapse down the road. However, neither the authors nor this reviewer know what actions will be taken when governments are faced with a cliff. Will we jump? Will we build a bridge? Or will we simply drive down and up again on the other side? Quite obviously, there are many ways to address a problem and the quiz would bring forth many options more.
For those still in need of a wakeup call, Aftershock is well worth the time. For their tips of prudence alone, this book deserves five stars. Despite their call to securities (to which many smart investors are averse), this is its strong point, and this reviewer is inclined to turn a blind eye on the overwhelming weak points because they differ little from common economic wisdom. Some of their predictions have come true, somewhat, but they are based on pretensions, speculation, or prophesy, not science or better analytical knowledge. After all, humans ignore all facts when inconvenient. My recommendation to the authors: stay away from economics and focus on the strengths: investment advice.
So, will there be an aftershock? Of course! Rule Nr. 1 is that all bubbles eventually pop. When and how big? Nobody has the slightest clue.
A.J. Deus
Social Economics of poverty
For an antithesis on the Aftershock’s ideas about the debt bubble see Debt Crisis – What Crisis? at www.ajdeus.org/articles/472
December 14, 2012
A book about economics cannot really be a page-turner, but this book was gripping. A thriller? Maybe horror flick? The authors spend a good bit of time tooting their own horn about how good a job they did calling the 2008 meltdown in their previous book, America's Bubble Economy. However, I thought it was all to good effect; if half of what they claim is true, I had better listen to their message in this book, no matter how much I'd prefer to dismiss it. If half of what they predict comes true, I had better be ready. Their message is not complicated, not abstract economic theorizing, but neither is it fluff. They detail the global economy, how we got here, how their model explains what has happened the last few years, and why things are going to get worse before they get better.
The global economy has grown the last 30 years, roaring through the 90s, as a result of huge bubbles that formed in America's economy. Working for an IT company, I remember well how the Internet bubble popped in 2000. The authors claim that we handled that so well because there are six other bubbles that were growing at the time: real estate, stock market, credit or private debt, discretionary spending, the dollar, and government debt. No more.
We all know how the real estate bubble popped in 2006 as housing prices plummeted. They tried to deny it, hoping the market would recover, until it dragged down the stock market and the banks failed in 2008. As bad as that seemed, neither of those bubbles have popped completely, and the others are poised to follow. The authors say housing pricing will continue to plummet (after all, housing prices jumped 80% from 2001 to 2006 while income grew only 2%), and the only reason the stock market stopped its free fall was because the government is printing trillions of dollars (see the dollar bubble). Loans are already much harder to get now, and once the dollar bubble pops, credit will dry up increasingly. With the shaky economy and people loosing jobs, discretionary spending (on the bigger and better necessity, the extra service, the second thingie) has dropped, and without credit and a weakened dollar, we will not be able to afford anything but the necessities. The economy will grind nearly to a halt.
The looming collapse of the dollar is what will guarantee that these four bubbles will pop completely and drop much farther than most people think. The dollar is already weak versus the Euro, which is troubled enough as it is. Huge amounts of foreign investment in our economy as the bubbles grew boosted the dollar's value, but it is all crumbling and will accelerate as foreign investors pull out. On top of this, the government under Obama has printed trillions of dollars (many times more than what was printed in the previous decades), trying to prop up the economy. Inflation (in the double digits) is sure to come, especially since no amount of printed money will save the economy and forestall the inflation.
Once the dollar bubble pops, the other four bubbles will collapse completely, and the worst of them all, our government debt bubble, will collapse quickly. Our debt has ballooned so much, a small increase in interest rates will mean tax revenues will not even cover the interest. In a tight death spiral, interest rates, inflation, and unemployment will rise, squeezing the first four bubbles some more, slowing the economy more. The government will be under pressure to save everything while having dug its own grave. Foreign money will flee the country (just slowing it would be our demise), and we will not be able to pay for anything.
It will be little comfort that the rest of the world will follow. They grew on the shoulders of giants, our giant bubbles that is. They will go down with us. Don't think China, the great new industrial powerhouse, can save anyone. Communists did not suddenly become great capitalists. They are printing money and riding the bubbles just like us.
The global economy will need new rules, a new structure. This will require a revolution. Not a bloody one, for the former regime will have already died a splashy death. A complete change, not an adjustment of rules, will be needed.
The good news is that the dollar is so widely used that it will not disappear. It will remain a valid currency. Similarly, this is a correction -- a huge one to be sure, but a correction to true value -- as opposed to a complete loss; the authors do not foresee bread lines like during the Great Depression, just a serious tightening of belts for those who do not hold foolish investments.
Here's to the new world to come. The next five or so years will be a wild ride. I cannot imagine what to tell my kids.
The global economy has grown the last 30 years, roaring through the 90s, as a result of huge bubbles that formed in America's economy. Working for an IT company, I remember well how the Internet bubble popped in 2000. The authors claim that we handled that so well because there are six other bubbles that were growing at the time: real estate, stock market, credit or private debt, discretionary spending, the dollar, and government debt. No more.
We all know how the real estate bubble popped in 2006 as housing prices plummeted. They tried to deny it, hoping the market would recover, until it dragged down the stock market and the banks failed in 2008. As bad as that seemed, neither of those bubbles have popped completely, and the others are poised to follow. The authors say housing pricing will continue to plummet (after all, housing prices jumped 80% from 2001 to 2006 while income grew only 2%), and the only reason the stock market stopped its free fall was because the government is printing trillions of dollars (see the dollar bubble). Loans are already much harder to get now, and once the dollar bubble pops, credit will dry up increasingly. With the shaky economy and people loosing jobs, discretionary spending (on the bigger and better necessity, the extra service, the second thingie) has dropped, and without credit and a weakened dollar, we will not be able to afford anything but the necessities. The economy will grind nearly to a halt.
The looming collapse of the dollar is what will guarantee that these four bubbles will pop completely and drop much farther than most people think. The dollar is already weak versus the Euro, which is troubled enough as it is. Huge amounts of foreign investment in our economy as the bubbles grew boosted the dollar's value, but it is all crumbling and will accelerate as foreign investors pull out. On top of this, the government under Obama has printed trillions of dollars (many times more than what was printed in the previous decades), trying to prop up the economy. Inflation (in the double digits) is sure to come, especially since no amount of printed money will save the economy and forestall the inflation.
Once the dollar bubble pops, the other four bubbles will collapse completely, and the worst of them all, our government debt bubble, will collapse quickly. Our debt has ballooned so much, a small increase in interest rates will mean tax revenues will not even cover the interest. In a tight death spiral, interest rates, inflation, and unemployment will rise, squeezing the first four bubbles some more, slowing the economy more. The government will be under pressure to save everything while having dug its own grave. Foreign money will flee the country (just slowing it would be our demise), and we will not be able to pay for anything.
It will be little comfort that the rest of the world will follow. They grew on the shoulders of giants, our giant bubbles that is. They will go down with us. Don't think China, the great new industrial powerhouse, can save anyone. Communists did not suddenly become great capitalists. They are printing money and riding the bubbles just like us.
The global economy will need new rules, a new structure. This will require a revolution. Not a bloody one, for the former regime will have already died a splashy death. A complete change, not an adjustment of rules, will be needed.
The good news is that the dollar is so widely used that it will not disappear. It will remain a valid currency. Similarly, this is a correction -- a huge one to be sure, but a correction to true value -- as opposed to a complete loss; the authors do not foresee bread lines like during the Great Depression, just a serious tightening of belts for those who do not hold foolish investments.
Here's to the new world to come. The next five or so years will be a wild ride. I cannot imagine what to tell my kids.
January 5, 2014
I can't recall who exactly recommended this to me when I first picked this up back in 2010 or 2011, but I do recall the cautionary note that they took as they described it and the author's conclusions. The global recession had begun four years earlier, since which time I had just barely been able to sell a house (seriously--I closed the sale of the house the same week that Bear Sterns ceased to be), had graduated from law school at perhaps the worst time for new attorneys to be entering the work force, and had managed to find a good, but not great paying, job at a local company. Financially speaking, the future seemed bleak, and I was not sanguine about my prospects for future income. Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown seemed like a warning voice against future economic calamity, so I picked it up and gave it a read.
Unfortunately, I was, largely, disappointed. Falling into that category of financial reading that seems to best be described as "fear mongering," I found it full of doom and gloom, threatening prognostications, and warnings about the future. I suspect that authors David and Robert Wiedemer, and Cindy Spitzer have made better money of the sale, and subsequent editions of, the book than most readers have from the advice they give.
This isn't to say that there may not be substance to their arguments. Looking at a succession of financial bubbles, including both the dotcom bubble and the more recent housing bubble, they posit that the bubbles have led the Federal Reserve to engage in reckless market manipulation that is going to result in 50% unemployment, a 90% stock market crash, and 100% annual inflation, starting in 2012.
Their advice? Sell your home, cash out your stocks, and convert your assets into gold and inflation pegged securities.
That's a stark transition, and from a set of authors who are perhaps inflating their own expertise in economic prophesy a bit further than their resumes merit.
Meanwhile, we find ourselves in 2014, the economy on the mend, and the catastrophic events predicted by Aftershock as yet unrealized. I suppose that there is still time, and I don't want to give the impression that everything is smelling of roses, but perhaps the take away is that the success of Aftershock is more about marketing for its authors than about economic prediction relevant to readers.
Unfortunately, I was, largely, disappointed. Falling into that category of financial reading that seems to best be described as "fear mongering," I found it full of doom and gloom, threatening prognostications, and warnings about the future. I suspect that authors David and Robert Wiedemer, and Cindy Spitzer have made better money of the sale, and subsequent editions of, the book than most readers have from the advice they give.
This isn't to say that there may not be substance to their arguments. Looking at a succession of financial bubbles, including both the dotcom bubble and the more recent housing bubble, they posit that the bubbles have led the Federal Reserve to engage in reckless market manipulation that is going to result in 50% unemployment, a 90% stock market crash, and 100% annual inflation, starting in 2012.
Their advice? Sell your home, cash out your stocks, and convert your assets into gold and inflation pegged securities.
That's a stark transition, and from a set of authors who are perhaps inflating their own expertise in economic prophesy a bit further than their resumes merit.
Meanwhile, we find ourselves in 2014, the economy on the mend, and the catastrophic events predicted by Aftershock as yet unrealized. I suppose that there is still time, and I don't want to give the impression that everything is smelling of roses, but perhaps the take away is that the success of Aftershock is more about marketing for its authors than about economic prediction relevant to readers.
April 22, 2013
Good, well-researched skepticism and contrarianism... the kind of stuff that keeps an investor from terminal drawdowns (risks-of-ruin,) and in position for the periodic "trade of a lifetime."
Having said that... there are a couple strong problems here... one very much forgivable givent he timing of the most recent edition (2011,) and the second glitch, not so much forgivable.
The partly forgivable is the most recent explosion of the digital hard currency markets, most notably bannered by BitCoin. The market entry and developement of BC and its fellow populist competitors is a *very* strong counter-power to the previously unchecked statist inflationary pressures. As we have observed in Greece, Spain, and now Argentina... where citizens once had no choice but to submit to their central banker's rape, the common man *now* can fairly simply convert his quickly decaying (and diluting) local scrip into a digital hard currency that is absolute, finite, and beyond the reach of any tyrant, group or government. This may not (probably will not) eliminate the debacle of future manipulated inflation... but it *WILL* be a game changer in that it will provide an ESCAPE to those who are ready and willing to trust the integrity of an open-source, peer-to-peer currency network over a closed-door bureaucratic nanny state.
The unforgivable oversight/omission was in relationship to permanent cash value life insurance designs. The authors referred to whole life as being vulnerable to the long bond markets and commercial real estate, *HOWEVER* they did not explain how real estate can collapse simultaneous to runaway inflation (real, or hidden.) Further, they present the idea that bond investing by insurance companies is strictly for speculative asset value, as opposed to yield (which is a significant component.) Of course, when inflation hits, and bond face values fall, yields climb... and that yield represents an insurance company's ability to buy better performing market investment hedges.
All in all... a good, quick read... subject to the two fairly important missing parts.
Having said that... there are a couple strong problems here... one very much forgivable givent he timing of the most recent edition (2011,) and the second glitch, not so much forgivable.
The partly forgivable is the most recent explosion of the digital hard currency markets, most notably bannered by BitCoin. The market entry and developement of BC and its fellow populist competitors is a *very* strong counter-power to the previously unchecked statist inflationary pressures. As we have observed in Greece, Spain, and now Argentina... where citizens once had no choice but to submit to their central banker's rape, the common man *now* can fairly simply convert his quickly decaying (and diluting) local scrip into a digital hard currency that is absolute, finite, and beyond the reach of any tyrant, group or government. This may not (probably will not) eliminate the debacle of future manipulated inflation... but it *WILL* be a game changer in that it will provide an ESCAPE to those who are ready and willing to trust the integrity of an open-source, peer-to-peer currency network over a closed-door bureaucratic nanny state.
The unforgivable oversight/omission was in relationship to permanent cash value life insurance designs. The authors referred to whole life as being vulnerable to the long bond markets and commercial real estate, *HOWEVER* they did not explain how real estate can collapse simultaneous to runaway inflation (real, or hidden.) Further, they present the idea that bond investing by insurance companies is strictly for speculative asset value, as opposed to yield (which is a significant component.) Of course, when inflation hits, and bond face values fall, yields climb... and that yield represents an insurance company's ability to buy better performing market investment hedges.
All in all... a good, quick read... subject to the two fairly important missing parts.
January 10, 2012
The book contains a lot of good information, however it seemed to be extremely repetitive. I believe the authors would benefit tremendously by rewriting it with the help of a more experienced author. If nothing else, the most salient points could easily be put into an executive summary that would be, at most, a few pages long.
What I enjoyed learning from the book was not only their recommendations, but WHY their recommendations make sense. For example, their advice in a highly-inflationary environment is to not be in real estate. To me, this is counterintuitive. I certainly wouldn't want to be holding cash if we experience hyperinflation. However, their point is that if (when!) inflation strikes, mortgage rates will jump, reducing the number of people able to afford a mortgage.
Although I believe that many of their recommendations make sense, I found their economic theorizing highly suspect. The authors are not a part of the Austrian school of economics. After reading this book's economic theories, I came away even MORE convinced that the Austrians have it right, with everyone else playing catch-up. So skip that chapter.
So I feel that they gave investing advice that deserves to be carefully considered. However, there has to be a way to deliver this advice in a more concise manner.
What I enjoyed learning from the book was not only their recommendations, but WHY their recommendations make sense. For example, their advice in a highly-inflationary environment is to not be in real estate. To me, this is counterintuitive. I certainly wouldn't want to be holding cash if we experience hyperinflation. However, their point is that if (when!) inflation strikes, mortgage rates will jump, reducing the number of people able to afford a mortgage.
Although I believe that many of their recommendations make sense, I found their economic theorizing highly suspect. The authors are not a part of the Austrian school of economics. After reading this book's economic theories, I came away even MORE convinced that the Austrians have it right, with everyone else playing catch-up. So skip that chapter.
So I feel that they gave investing advice that deserves to be carefully considered. However, there has to be a way to deliver this advice in a more concise manner.
August 11, 2012
I had read the 1st ed. and knew I MUST read the follow-up. Truly, shocking (the 1st) and so far it is still warning of dire straits soon ahead, but also gives hope if you will just pay attention, and not to the usual TV gurus who only want to tell you the optimistic outlook. Just have to get serious about finishing reading since the timeline for predictions is getting closer. A MUST read if you want to save yourself from world, financial calamity.
Finally got serious about reading. On Chapter 3, HIGH Inflation & Interest Rates (added to 2nd Ed.). Not a matter of if, a matter of when. Actual dates are hard to predict, but they say in two to five years, 2013-2015. Then the U.S. Dollar and U.S. Debt bubbles will burst plunging world into financial chaos. This is NOT a market cycle, it is a World Monetary Evolution. Much harder times coming before better. Will never be the same. Next chapters will tell how to protect and even profit in this crucial period. Scaring the socks off me.
Finally got serious about reading. On Chapter 3, HIGH Inflation & Interest Rates (added to 2nd Ed.). Not a matter of if, a matter of when. Actual dates are hard to predict, but they say in two to five years, 2013-2015. Then the U.S. Dollar and U.S. Debt bubbles will burst plunging world into financial chaos. This is NOT a market cycle, it is a World Monetary Evolution. Much harder times coming before better. Will never be the same. Next chapters will tell how to protect and even profit in this crucial period. Scaring the socks off me.
December 6, 2012
This book was repetitive (halfway through, I cringed every time I read "multi-bubble economy") and vague. Plus it recommended a few unethical things about how to stay in your house even though it's being foreclosed on. However, I do believe the authors -- who correctly predicted the housing bubble back when everyone else said things were fine -- are absolutely correct in their concerns about the future of our economy and the crashes that are ahead. Basically, they see the huge amount of private debt, stocks, the government debt, and the money supply as the next big problems ahead. They predict an implosion, widespread inflation, and lots of losses ahead.
They were a bit vague on what do to about it, however, beyond saying that gold is a good investment and that there is still time to invest in stocks and get out before too soon. They do promote their own company's services and I'm not sure I liked that.
They were a bit vague on what do to about it, however, beyond saying that gold is a good investment and that there is still time to invest in stocks and get out before too soon. They do promote their own company's services and I'm not sure I liked that.
June 29, 2010
Interesting thoughts on what our future economy will look like. All speculation, but based on good facts. I DO NOT agree with their look ahead on page 218, "There won't be a massive level of violence in the streets but there will be dramatically increased stresses on individuals due to the immense economic pressures. Divorces will increase and domestic violence will increase. Expect more killings of family and friends by distraught people who have lost so much economically, but still have plenty of guns handy to express their anger and depression."
I agree that it is not just another cycle, but something is evolving, and that something could be a little scary. Like something we've never seen before.
I agree that it is not just another cycle, but something is evolving, and that something could be a little scary. Like something we've never seen before.
March 30, 2010
Very interesting economics book. Given that their first book was dead on about the real estate, job market downturn, this book makes you wonder about the next four to five years. It has given me ideas (and time) to rethink current and future investments and purchases. Hopefully things are not as dire as the publishers speculate it could be. However, an ounce of prevention is worth a pound of cure.
Although it is somewhat laborious to read at parts, it is a fairly easy read vs. other economic books/outlooks.
Although it is somewhat laborious to read at parts, it is a fairly easy read vs. other economic books/outlooks.
October 30, 2011
Don't buy the book!
I can tell you right here what it says
There are two more bubbles that will burst causing tremendous problems for the stock market, housing market and jobs.
They are the US Debt, and the value of the US Dollar.
While this individual has been right before, I give no advice on investing, as this book clearly is intended to do, yet it doesn't really. Its really a highly repetitive sales job. They must repeat themselves at least 50 times!
I can tell you right here what it says
There are two more bubbles that will burst causing tremendous problems for the stock market, housing market and jobs.
They are the US Debt, and the value of the US Dollar.
While this individual has been right before, I give no advice on investing, as this book clearly is intended to do, yet it doesn't really. Its really a highly repetitive sales job. They must repeat themselves at least 50 times!
March 13, 2012
This is a typical doom and gloom financial outlook book. That I fell for hook, line, and sinker! They believe that there's going to be a government debt bubble burst and a dollar bubble burst. The government is printing money like it grows on trees and we're going to have to pay for it in inflation. Prepare for your stocks,bonds, and your house value to drop. Buy gold and coal companies (basic necessity that the US produces the most of and will be exported significantly in the future).
May 1, 2017
Rating - 8.7
The content about the pending Aftershock to the financial collapse/irrational rebound is quite the mind-blower & has actually influenced my personal spending behavior & likely investment mix going forward
Biggest issues w the book are two fold - the arrogance & repetition of the authors lead to 100 extra pages than needed & turns you off at the midpoint; Some solid points made which make for bleak times
The content about the pending Aftershock to the financial collapse/irrational rebound is quite the mind-blower & has actually influenced my personal spending behavior & likely investment mix going forward
Biggest issues w the book are two fold - the arrogance & repetition of the authors lead to 100 extra pages than needed & turns you off at the midpoint; Some solid points made which make for bleak times
October 24, 2010
I definitely look at the status of our economy differently. Use wisdom when discerning what the media says about the state of the economy, especially when an economic "pundit" says something is "guaranteed" to perform (either toward an upward or downward trend), while the stats are inconsistent with the respective index.
May 30, 2011
Unfortunately, I believe this author is right about the future of our economy.
March 25, 2015
Should be required reading for everyone. This book sets up what is GOING to happen to our economy. Read it and get prepared.
Read
December 7, 2020This is a follow-up book to Wiedemer's earlier work, America's Bubble Economy, and a clever bit of pre-buzz for his coming "sequels", which he promotes heavily at the end of the book. For the most part, I felt like this book was mostly intended to promote the author's web site, newsletter and other products. Wiedemer may have been either very astute when he predicted the collapse of the real estate bubble, stock market, and consumer spending in 2006, or merely lucky...I'm leaning towards lucky.
The other two "bubbles" he describes are the U.S. Dollar and Government Debt. I don't know what seems so revolutionary about this thinking - those of us who have consistently tried to vote in fiscal conservatives over the years have been harping on these themes since...well, forever. We haven't actually had a president in office in decades who was seriously interested in cutting spending across the board - deeply. They've all had to either play the compromise game and allow more spending than they wanted in order to get their own programs supported, or have been irresponsible spenders to begin with. Despite the political football games being played with the debt ceiling recently, it's obvious to anyone with any sense whatsoever that you cannot go on borrowing money indefinitely - something's gotta give. And when you borrow and spend money the way our country has over the last fifty years, at some point, the "full faith" upon which our currency's value is based becomes ridiculous, and the dollar's utility as a reserve currency will come to an end.
So, one point where it started to go off the tracks for me was when Wiedemer talked about the collapse of the dollar, and said it would be followed soon by the collapse of the Euro. The Euro may be collapsing right now, so I begin to wonder how prescient he really is, if he misses the fundamental instability of the EU currency and the complete fiscal irresponsibility of a number of its member states. What is discouraging, however, is that few in our country can extrapolate from the situation in Greece, Italy, or France, and see that the social welfare state we are creating here, mimicking theirs, is unsustainable over the long haul.
Wiedemer also talks about the coming global currency, which he calls the IMU - International Monetary Unit. While I don't think the idea itself is all that far-fetched, and could indeed be rolled into place, it's not going to come about as the result of the great wisdom of our statesmen and economists, as he seems to believe, but because of the submission of many countries around the world to the idea of a one world government, controlled by something resembling the U.N. Some of our leaders already are trying to give up U.S. sovereignty to the U.N. and World Court, and may eventually succeed, as the idea of American exceptionalism is destroyed through our educational system.
Wiedemer's prescriptions to protect ourselves are pretty limited - and parrot the usual recommendations of the perennial doom and gloom crowd. Gold, precious metals, investment grade gemstones - all seem to do quite well in hyperinflationary times, but they are not usually very liquid - somewhat impractical to use to generate income in retirement, and you pay sales commissions coming and going, which really eats into returns. Stay away from real estate, he says. So, if the real estate market is going lower, that shouldn't affect rental income streams from investment properties in a major way, should it? This type of investment, too, is a good one for retirees - generating a generally steady and inflation protected income. He also says to get out of both the domestic and foreign stock market. If your 401K plan is like 99% of those offered by employers in this country, your automatic retirement savings are going to either the stock market, money market, bond market...some sort of mutual fund. You can't buy gold and jewels there, and one of the investments he does recommend, once we get to high inflation, short term bonds, isn't usually a choice in most of those plans, either.
About the only thing I can recommend is for anyone who's trying to invest for their future to stay diversified - pick an assett mix and rebalance when a particular area gets too far out of line - pop your personal bubbles before they burst in a painful manner. I'm not sure that Wiedemer's book, or his advice, should be taken with anything but a grain of salt.
The other two "bubbles" he describes are the U.S. Dollar and Government Debt. I don't know what seems so revolutionary about this thinking - those of us who have consistently tried to vote in fiscal conservatives over the years have been harping on these themes since...well, forever. We haven't actually had a president in office in decades who was seriously interested in cutting spending across the board - deeply. They've all had to either play the compromise game and allow more spending than they wanted in order to get their own programs supported, or have been irresponsible spenders to begin with. Despite the political football games being played with the debt ceiling recently, it's obvious to anyone with any sense whatsoever that you cannot go on borrowing money indefinitely - something's gotta give. And when you borrow and spend money the way our country has over the last fifty years, at some point, the "full faith" upon which our currency's value is based becomes ridiculous, and the dollar's utility as a reserve currency will come to an end.
So, one point where it started to go off the tracks for me was when Wiedemer talked about the collapse of the dollar, and said it would be followed soon by the collapse of the Euro. The Euro may be collapsing right now, so I begin to wonder how prescient he really is, if he misses the fundamental instability of the EU currency and the complete fiscal irresponsibility of a number of its member states. What is discouraging, however, is that few in our country can extrapolate from the situation in Greece, Italy, or France, and see that the social welfare state we are creating here, mimicking theirs, is unsustainable over the long haul.
Wiedemer also talks about the coming global currency, which he calls the IMU - International Monetary Unit. While I don't think the idea itself is all that far-fetched, and could indeed be rolled into place, it's not going to come about as the result of the great wisdom of our statesmen and economists, as he seems to believe, but because of the submission of many countries around the world to the idea of a one world government, controlled by something resembling the U.N. Some of our leaders already are trying to give up U.S. sovereignty to the U.N. and World Court, and may eventually succeed, as the idea of American exceptionalism is destroyed through our educational system.
Wiedemer's prescriptions to protect ourselves are pretty limited - and parrot the usual recommendations of the perennial doom and gloom crowd. Gold, precious metals, investment grade gemstones - all seem to do quite well in hyperinflationary times, but they are not usually very liquid - somewhat impractical to use to generate income in retirement, and you pay sales commissions coming and going, which really eats into returns. Stay away from real estate, he says. So, if the real estate market is going lower, that shouldn't affect rental income streams from investment properties in a major way, should it? This type of investment, too, is a good one for retirees - generating a generally steady and inflation protected income. He also says to get out of both the domestic and foreign stock market. If your 401K plan is like 99% of those offered by employers in this country, your automatic retirement savings are going to either the stock market, money market, bond market...some sort of mutual fund. You can't buy gold and jewels there, and one of the investments he does recommend, once we get to high inflation, short term bonds, isn't usually a choice in most of those plans, either.
About the only thing I can recommend is for anyone who's trying to invest for their future to stay diversified - pick an assett mix and rebalance when a particular area gets too far out of line - pop your personal bubbles before they burst in a painful manner. I'm not sure that Wiedemer's book, or his advice, should be taken with anything but a grain of salt.
March 15, 2025
This book was written in 2011 about the upcoming popping of the American bubble economy. You'd think that by me reading it in 2025, I'd have been late to the party, but this book couldn't have been any more relevant to the current economy. While the authors likely thought their predictions would play out in the few years following the book being published, the points made seem to be valid. They weren't wrong, just early.
We know by now that the Great Financial Crisis was cut short by bailouts from the government. I would argue that the events that were supposed to unfold following the popping of the real estate and stock market bubbles in '08 were delayed due to the Fed going on a printing spree. QE and other financial stimulus stopped the bottom from falling out of the market completely, leading to an insane boom in asset values in the last decade. Because assets continued to increase, the US dollar bubble and government debt bubbles have yet to pop, and have actually re-inflated the stock market and real estate bubbles to levels much higher than leading up to the GFC.
In the current economy, housing and stock markets continue to reach new highs, as does inflation. However, we are starting to see cracks forming, which could lead to the events predicted by the authors. Gold is looking very strong as the dollar and other currencies begin to weaken (as the authors predicted), and there are even some cryptocurrencies that look like they might be on their way to becoming the International Monetary Units (IMUs) that the authors predicted would replace the dollar.
All in all, it was an informative book that I think everybody could benefit from reading. Definitely not the kind of book to keep you on the edge of your seat, but gets the job done. As somebody with knowledge in the markets, I appreciated the suggestions to use LEAPS or inverse ETFs to make some money on the downside. For anyone who's not an investor, I believe these strategies and others are explained in sufficient detail to make you some money as well.
Let's see how the rest unfolds!
We know by now that the Great Financial Crisis was cut short by bailouts from the government. I would argue that the events that were supposed to unfold following the popping of the real estate and stock market bubbles in '08 were delayed due to the Fed going on a printing spree. QE and other financial stimulus stopped the bottom from falling out of the market completely, leading to an insane boom in asset values in the last decade. Because assets continued to increase, the US dollar bubble and government debt bubbles have yet to pop, and have actually re-inflated the stock market and real estate bubbles to levels much higher than leading up to the GFC.
In the current economy, housing and stock markets continue to reach new highs, as does inflation. However, we are starting to see cracks forming, which could lead to the events predicted by the authors. Gold is looking very strong as the dollar and other currencies begin to weaken (as the authors predicted), and there are even some cryptocurrencies that look like they might be on their way to becoming the International Monetary Units (IMUs) that the authors predicted would replace the dollar.
All in all, it was an informative book that I think everybody could benefit from reading. Definitely not the kind of book to keep you on the edge of your seat, but gets the job done. As somebody with knowledge in the markets, I appreciated the suggestions to use LEAPS or inverse ETFs to make some money on the downside. For anyone who's not an investor, I believe these strategies and others are explained in sufficient detail to make you some money as well.
Let's see how the rest unfolds!
July 7, 2022
You should definitely read this book... if you find it on the ground
The real estate bubble happened because housing prices went up so fast from 2000-2006
Consumer spending accounts for about 70% of the U.S economy. When people stop spending as much, crashes are bound to happen
Just because the fed is printing money, things aren't necessarily bad. Particularly when a country is productive & good. However, when a country isn't productive watch out
Massively increasing the money supply will eventually cause inflation
Unless there is significant demand, no asset can retain is value
The value of any currency is set up through supply & demand
Falling demand makes X currency go down -- Foreign investors lose interest in X assets
The value of a currency is not a reflection of whose overall economy is better relative to others, but a matter of supply & demand
3 rules for a recession
1) Get ready to exit stocks
2) Stay away from real estate until the bubble pops
3) Stay away from long-term bonds & fixed-rate investments
Invest when the government debt bubbles pop
During a recession:
- Buy bear stocks
- Buy foreign currencies
- Buy leap options
- Invest in gold
- Invest in oil
The real estate bubble happened because housing prices went up so fast from 2000-2006
Consumer spending accounts for about 70% of the U.S economy. When people stop spending as much, crashes are bound to happen
Just because the fed is printing money, things aren't necessarily bad. Particularly when a country is productive & good. However, when a country isn't productive watch out
Massively increasing the money supply will eventually cause inflation
Unless there is significant demand, no asset can retain is value
The value of any currency is set up through supply & demand
Falling demand makes X currency go down -- Foreign investors lose interest in X assets
The value of a currency is not a reflection of whose overall economy is better relative to others, but a matter of supply & demand
3 rules for a recession
1) Get ready to exit stocks
2) Stay away from real estate until the bubble pops
3) Stay away from long-term bonds & fixed-rate investments
Invest when the government debt bubbles pop
During a recession:
- Buy bear stocks
- Buy foreign currencies
- Buy leap options
- Invest in gold
- Invest in oil
November 17, 2016
great beginner book, goes over some basic macroeconomics, and lists many solid reasons why our economy is much stable and wealthier than it deserves to be. excellent thinking on safe investments for the future. the sad thing is that it has been 5 or 6 years since it was published, and the crash has not happened yet. had readers taken their advice immediately, they would have missed out greatly! I learned many things from these guys, ready to learn more.
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