The Book: "Aftershock" ... Opinions?

Yes Bill I am reading the book and am well over half way through and It It GOOD! I agree with most and it makes sense as it is written and these guys are not just trying to sell gold and agree that Gold to is a bubble also. The book explains how the economy is a bubble and this is Not one of those market downturns but a world in search of the right answers and the wrong things being done. We have to go through some pain. These guys say gold is a good ride and the time will come to sell it and put the money back into the new market with great buying opportunity as long as you have protected enough of your money to invest as to where Gold will play some part they also tell of other investments as well. Good info in this book!

 

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I had a book in the 1980's called "How to Profit From the Next Great Depression".
Had I followed the advice in the book, one of my servants would be typing this post.

 

I read the book. The book does advocate buying physical gold, and I personally believe it's not too late to buy gold to protect what savings we do have from an eventual collapse in the USD.

While I agree largely with the premises and conclusions of the book (that there is a major economic meltdown coming), I have to point out that the authors seem to be globalists who really don't care about what a meltdown means to the American way of life as long as they have their portfolios aligned to the coming new global currency they insist is inevitable.

Is a global currency inevitable? I don't know. I'd personally prefer to be optimistic that the dollar can be saved if we elect enough constitutionalists, but maybe that's my irrational optimism coming through.

 

Hi Bill,

Surprise. I read "Aftershock" and liked it. I agree whole heartedly with the authors' argument that flooding a country's economy with fiat money -- so-called quantitative easing -- leads to economic bubbles. See late 18th century France and post-World War I Germany. The QEs are game changes. This is not just another mistaken disaster book.

The last chapter and the epilogue raise points with which I disagree.

Buy gold? Yes. Anything else? Yes. Drop an investment advisor who doesn't understand the nature of bubble economies? Yes. Find an IA who does understand bubble economies? Yes.

Is the sky falling? Not necessarily. But look what has happened in Arab nations when everyday people have had enough abuse, including fiat money inflation. Can the sky here fall in a similar way? It has after one baseball game and one football game in Calif., our most screwed-up state.

Making predictions is tough. To be at all close, predictions have to be general. The authors of "Aftershock" were a little too detailed in some of their predictions. and the STEP system is incomplete. For instance, what comes before science? Anyway, seeing corruption or goodness in a culture in retrospect is fairly easy. Has a corrupt culture in the past been successful by any measure? No.

Finally, I wish I were writing this in 2009 instead of 2 1/2 years after the publication date of "Aftershock." I hope it's better late than never for me.

 

Thanks for a good summary. I have not read the book so I'll just make one comment regarding Keynsian economics. The theories are largely true and extremely valuable. But like all things, when misused will not work. There is nothing in Keynesian theory that advocates trillion dollar deficits, but talks about a balanced budget over the business cycle. There is nothing that indicates the government should act agressively to prevent recession, but only to "lean against the wind." Keynes gets a lot of bad press because of what is happening today, with folks not quite realizing that our government and economic policymakers aren't following Keynes at all. So the economic theory gets a lot of bad press that should instead go to a bought and paid for government giving money to their friends and handlers in the name of economic policy.

So is Keynes superior to Austrian economics or classical economics? Probably not. If policymakers were Austrians or classicists, they'd still mess it up. And if the US just left everything to the free market in a world where none of our trading partners practice it, things would be just as bad or worse.

 

Economics and Politicians

Thanks, Cloudsweeper.

The WSJ had some words on Lord Keynes recently.

I had to laugh at the notion that, whatever they learned about economics, policymakers would do the wrong thing. I'm afraid I see it that way, too. In coming up with a better form or sort of gov't than we use now, I can only imagine constitutional limits on just what elected pols can do, highly delimited limits, "hot stove" limits. That is, go outside the limits and the pols get their hands burnt. Not literally. Fined, perhaps. Lose their jobs.

This is CoinTalk. And started with words about gold buying. A gold standard would be a limit, certainly. But many think a gold standard is problematic. Maybe the problems can be solved.

 

Well, I don't want to get heavily into politics, but will offer the observation that the Constitution originally worked because it put limits on the power of the two largest entities in the society of the time -- government and churches. That was sufficient to raise individual citizens to primacy. But now we have a third and fourth -- multinational corporations and central banks. So a simplistic return to what is written in the Consititution just lets the multinationals and central banks run wild and stomp on the citizens. And modifying the Constitution is fraught with the danger of losing what rights still remain since the political class doesn't have the intellect or ethics of the Founding Fathers.

I have no solution to this dilemma, but until modifications are made to ensure that no entity has rights equal to or greater than citizens, things can only get worse.

Regarding the gold standard, I don't see the problem that others see with making gold and silver money in some form or another. The currency in circulation is about $2trillion now, and with a modest revaluation in gold and silver, could be backed and replaced. The use of computerized banking would facilitate this by allowing the metal to reside in banks while gold and silver certificates or debit cards are used for daily transactions. It could be done, but won't be done.

 

The ideology behind Keynesianism as I understand it (and correct me if I'm wrong) is that the public sector (read "government") can be a tool to finesse the overall economy, evening out the amplitude of the "business cycle." IMO, however, government does almost nothing right, precisely because of what you alluded to...that politicians are bought and paid for in our current crony-capitalist economic environment. Politicians are incentivized to "stimulate the economy" by paying off their campaign donors with pet projects. So in theory it may sound grand that government can "even out the business cycles" but this will never happen. Let's get government out of the way of the private sector and let the market determine everything from the value of the dollar to the value of gold. It's none of the Fed's business.

 

young soon to be father here

Hey guys, I've read all your posts on this topic and a lot of you seem to be pretty educated and have good plans with your future investments. I saw this book online and was intrigued by it. It's obvious our government can't handle our economy and judging by the downfall in 2008 and what we are heading towards.. I myself would like to be prepared.

I'm not sure where on this forum I should post this so I decided just to add to this thread... but here goes...

The reason I am posting is for advice. I am currently in college and about to receive a 2-year degree. I live in North Carolina in an area where it's difficult to find a job but I'm constantly applying for positions. I have a baby on the way and I'm trying to establish a plan where I could have a secure future. I currently have no financial income and my best skills are my artistic ones. I have a decent plan for putting my design skills to use but with little money and lack of business understanding it's taking a lot longer. Plus the economy is making me feel like my original business plan might not work out. Regardless that is still my goal and I'm working for it.

So my post is to gain some advice from you guys on what I should do in my situation. Maybe some ideas on how to generate money until I can get enough to actually invest. I would rather get the advice from "real" people then relying on a book someone made to profit of off.

 

I'll tell you what I told my kids when they were just graduating.

1. Work at something you like. Every career path leads to significant earnings for the people at the top, and if you like what you do, there is a greater chance of reaching the top.

2. The best way to accumulate money to invest is to work, and this requires a lot of effort to find a job. You should set a goal to send out at least 10 resume's a week [this might be low]. Apply for everything that interests you and everything even close. The best website in my opinion is www.indeed.com.

3. Don't be intimidated by people with business degrees. Many people end up with those majors because they couldn't handle your major. I can tell from your post that you write well. Communications skills are more important than the type of degree you have.

4. Apply for jobs at banking and insurance companies. Nobody learns anything about processing claims or underwriting when they are in school, and virtually all companies know they will have to train all new applicants. And they have above average benefit packages.

Good luck and welcome to CoinTalk!

 

I appreciate the advice Cloudsweeper. I'm not trying to divert the attention to the original topic here and I'm sorry if I am. I actually do use Indeed.com but a lot of the jobs on there lately require previous experience in whatever field it is. I've only had two jobs, one that I worked for 2 months and quit (hardest manual labor job around here) because I was in school and young. The other was just a seasonal job at Walmart. So my prior work history I feel is hurting me. Again thanks for the advice, once I start making money I'll focus my energy on investments. To relate this to the original topic, the prediction of another "Great Depresssion" just made it more evident that I need to get a better plan together.

 

Don't overestimate your competition or underestimate yourself. Any job that requires 1-2 year of experience is essentially entry level. Many times the writers of job ads just put down more qualifications than they actually expect.

 

It's never easy. The theory is fairly [not completely] sound. But if you let the free market determine eveything the problems will be just as great. Without regulation, large companies will use predatory pricing to bankrupt weaker and smaller competitors. Companies will collude to fix wages and benefits at subsistance levels. Product safety will take a back seat to profits. Workplace safety will be ignored and injuries and deaths on the job will return to levels of 100+ years ago. Environmental law will be ignored as it is in other nations.

Never underestimate the power of greed. Almost no CEOs care anything about employees, the local economy, or anything but themselves. Most are probably psychopathic and will only do what is forced upon them by the legal system and economic policy. Look at the job situation. The free trade agreements over the past couple of decades have led to the transfer of much of the investment capital and jobs to other nations. If tarriffs and other regulations were in place, this would never have occurred.

The details are unimportant, but the point is -- the people in the private sector are no better than those who run oppressive governments around the world, or the leaders of various theocratic countries around the world. Free trade is probably okay for primitive tribes, but modern economies need controls over government, churches and large businesses. Oherwise, people will end up serving the institutions instead of the institutions serving the people.

Think about it.

 

In my opinion it's better to have any job on your resume than to have a time gap where you didn't work, because then the next question becomes what were you doing during that time? Ambition and tenacity will take you far in most any field as long as you can get your foot in the door. If you are truly concerned about things my (biased) suggestion would be to buy small amounts of silver, even if it's just one coin per month. Most people can cinch the belt and come up with that, it's just a simple (yet not so easy) matter of living below your means instead of beyond them as many do. I suggest this in the context of buying and holding for the sake of having the valuable metal in your possession, as opposed to trying to turn a quick buck which may or may not pan out. If you're trying to raise capital this could potentially fit the bill but it is also a risk as the market price is driven by paper commodities and is not a true representation of physical supply and demand, so you might want to think of alternatives in that case. I can't think of any though besides just working as many jobs as possible regardless of if they are your first choice. It's amazing how much money you can save when you work 80 hours a week and don't have time for anything else.

 

I am almost through this book. The points raised are entirely plausible with regard to the expectation that foreign investment in this country WILL recede in the not too distant future (within 2-4 years). The thesis behind this point is valid. Foreign investment will find other ways to make money. They already are doing so. When foreign investment starts to erode; the Treasury bubble WILL burst & rates WILL push higher. The falling dollar (60% vs. Euro since 2000) is another example that WILL continue. Our financial system is being dominated by existing monies in financial firms trading amongst themselves. The points raised about discretionary spending are also valid. The consumer is running out of gas with speed. This is deflationary to our economy which is WORSE then inflation. The result will inevitably be "Stagflaton" which is a very painful term. We are experiencing it now (middle to upper middle class included). This economic model is re-calibrating to the new normal. That being more savings, less debt, less discretionary spending and overall a lower standard of living. It is happening now. It will continue regardless of any stimulus Washington can come up with.
I have not purchased gold. Sorry I did not 5 years ago. Still am hesitant as I do not see gold as a real currency (due to my own ignorance I guess) or as a solution to the re-calibration of our economy within the world economy.

Our troubles are deep within the fabric as we have been "conditioned" towards entltlement. That includes me. Not my parents or their parents. Gov't candidates know this well & gear their campaigns towards entitlement as it's not painful & gets votes. Our government has clearly lost it's moral compass. Perhaps we have as well. That said - We are (overall) a pretty industrious people and CAN grow out of our troubles I believe. The best way (in my opinion) is to start with energy exploration & development right here. Just look at North Dakota. Incentives for real energy reforms (trucking on liquified Nat gas) is the best place for us to re-industrialize. We have the resources, technology & people to do it and to do it cleanly. What is holding us back? Our gov't caving in to environmental groups. I have bad news for envirnomentalists - Massive unemployment & crime also hurts the environment. So does scarcity & war.
Are we truely going to be the great people that our grandparents were? Who sacrificed themselves for the generations to come? So far - we clearly are not.
Come on gov't candidates - get smart & tell us what we need to hear & what we will do not what we want to hear & what we should do. The hour's are getting shorter.

 

"Aftershock's" Bubbles.

Aaah, the "Bubbles". The condition where the "under-pinnings" of the respective Value of (or "Reward" for) the Commodity or Service is not commensurate nor sustainable. Housing Market Values climbing at rates far above (and away from) potential Consumers' Wages.

What of Corporate CEO's? What stellar direction has been provided by entrusted CEO's that resulted in astronomical benefits to Customers, Investors, Employees and the US of A? Is it the legendary Amusement Parks of this Franchise near Orlando and LA that pays its Executives exhorbanate salaries; yet, Gate Prices preclude many, many children from enjoying the experience? Or the CEO's of Detroit's once big, big Industries.... where a "great" profit wasn't enough... stupendous profits were sought thru Over-Seas relocations (cheaper labor).... thus, breaking the "Circle of Life" that had resided in the States.

I am grateful to the authors of "Aftershock" for their characterization of "Overly Inflated 'Values'" in comparison to their true Values/Worth.

I'd suggest that such paradigm be extended to other facets of "Business".

 

Here's an example that many can understand.

A Primer: Understanding Derivatives

Heidi is the proprietor of a bar in Detroit ...

She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit.

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.

Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit.

He sees no reason for any undue concern because he has the debts of the unemployed alcoholics as collateral!

At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS.

These "securities" then are bundled and traded on international securities markets.

Naive investors don't really understand that the securities being sold to them, as "AAA Secured Bonds" really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb - and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons. But, being unemployed alcoholics -- they cannot pay back their drinking debts.

Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and Heidi's 11 employees lose their jobs.

Overnight, DRINKBOND prices drop by 90%.

The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the BOND securities.

They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion-dollar no-strings attached cash infusion from the government.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, nondrinkers who have never been in Heidi's bar.

Now do you understand?

 

I keep forgetting to read the book. At this rate, by the time I get around to it, we'll be half way through the next recovery.

What benefits? How about every time you go to the supermarket, the shelves are stocked. When you go home at night, the electric lights work. If you need clothing, a variety of prices and styles are available at thousands of stores. When you turn on the TV, you have hundreds of cable channels. The newspaper is delivered to your door every morning just hours after going to press. You can buy, rent, or lease a car. When you go to the gas station, fuel that started out 6 weeks prior in the ground thousands of miles away is waiting for you. When you sign on to CoinTalk, it is there. You can buy a cell phone. If it gets cold, you can turn up the heat and your house gets warm. The poor in America have enough food to be fat. Highway potholes get filled in with asphalt from Saudi Arabia. All sorts of products are available from China. You can buy food grown thousands of miles away. The stock market is open for business 5 days a week. You have a bed. And the most amazing thing of all, someone had to tell you this because you are too busy being envious of others to notice.

Welcome to CoinTalk!

 

"And the most amazing thing of all, someone had to tell you this because you are too busy being envious of others to notice."

Envy does not come into play here. I fact, I'm in pretty good shape all around and have no "wants" save for my kids' welfare.

I have been in the "Business World" for Decades and the quantity/quality of many, many "Executive Decisions/Directions" I've witnessed resemble a "New Product Development" illustration I saw years ago: a large-mouthed Funnel filled to the brim with "ideas" and a very, very small trickling of something useful emerging from the spout; of new Exec-Staff's coming on-board with new "initiatives" (and their respective astronomical costs)... only to eventually fade away (very quietly, I might add).

Gas at the Pumps, Food on the Shelves, Electricity in through the "Weather-Heads"; generally due to (1) employees in the "trenches" doing the work, (2) supervisory employees that've done the work and are now mentoring, monitoring and evolving the protocol and (3) management who's role should be to remove obsticles and/or facilitate improvements.

I dare say the sense of entitlement resides more in Business' Ivry Towers than in the field. eg: BP's "Boss" during their catastrophy being quoted that he wanted his life back; such life exampled by his furlow to watch his Yacht Race.

 

There are good CEOs, bad CEOs and everything in between. The same can be said for the empolyees in the trenches and their supervisors. It's just too easy to claim CEOs are different from everybody else and somehow useless. At my company, the CEO constantly meets with our largest customers to make sure the rest of the corporation is delivering. Another primary function of the CEO is to have the final vote on capital allocation. Good decisions make for good companies and ultimately higher stock prices. The reverse is also true.

I would agree that on balance they are overpaid, but I wouldn't say that they provide no benefits to customers, employees and investors. I know it is the thing to do these days, but it doesn't seem to hold up under scrutiny.