Product Description: "History shows that people who save and invest grow and prosper, and the others deteriorate and collapse. As Financial Reckoning Day demonstrates, artificially low interest rates and rapid credit creation policies set by Alan Greenspan and the Federal Reserve caused the bubble in U.S. stocks of the late '90s. . . . Now, policies being pursued at the Fed are making the bubble worse. They are changing it from a stock market bubble to a consumption and housing bubble. And when those bubbles burst, it's going to be worse than the stock market bubble . . . No one, of course, wants to hear it. They want the quick fix. They want to buy the stock and watch it go up twenty-five percent because that's what happened last year, and that's what they say on TV." —Jim Rogers, author of the bestseller Adventure Capitalist from the Foreword to Financial Reckoning Day
Advanced praise from bestselling authors
"An investment book that will not only enlarge your investment horizon, but also make you laugh and thoroughly entertain you for a few hours." —Dr. Marc Faber, author of the bestseller Tomorrow's Gold
"Financial Reckoning Day is . . . in the category of scintillating sex or good vision, something to be savored and enjoyed-before it is too late." —James Dale Davidson, author of the bestseller The Great Reckoning and The Sovereign Individual
"A powerful and insightful vision . . . each paragraph stimulates a new rush of thoughts that fills in gaping holes in the investor's understanding of what has happened to their dreams . . . while prepping them to confront any new confusion that may arrive." —Martin D. Weiss, author of the bestseller Crash Profits
This Book is a Must Read for the Serious Investor It is said that "History Repeats Itself"; the same can be said about investments and investment cycles, as Bill Bonner explains in this book.
Simply put, this book is a must read!
A Dim View of the Future Bonner and Wiggins see the world as a complicated place, where things can easily go differently than expected. One of the big problems is the human tendency to hop on the bandwagon, expecting that successful strategies will continue to work even as the chances that they will fail is increasing.
The stock market does not go up year after year, sooner or later there will be some down years. But once people get used to double digit stock returns, they expect them to continue and adjust their spending accordingly.
Stock price growth is dependent on earnings growth, which requires new products and investment. Financial engineering and cost cutting only work in the short run. Managing earnings on a quarterly basis is a sure-fire way to discourage long-term strategic moves.
Investment must come from savings, which represents foregone consumption. If the central monetary authority tries to compensate for inadequate savings by creating too much money, the currency will lose value rather than supporting the creation of wealth.
Some theorists see the Great Depression as the result of not resorting to deficit spending quickly enough. Others blame the failure to create enough money quickly enough. Neither view is sound, per Bonner and Wiggins, because once the economic situation (which started as a speculative boom) got out of hand the government was powerless to correct it.
Similarly, the Japanese government drove interest rates down to virtually zero and engaged in radical deficit spending in the 1990s. Neither tactic cured a prolonged depression in that country.
And guess what, the U.S. seems to be headed for another prolonged depression, which started with a stock market bust around the turn of the century and will go on to a housing bust, etc. The timing is apparently running a few years behind the depression in Japan because the postwar baby boom lasted longer here than there. In recognition that things often turn out differently than expected, however, we will not know for sure what is coming until it happens.
The arguments are well crafted and backed by plenty of historical examples, but the authors' fatalistic tone is a bit hard to take. It would be nice to see some suggestions as to how economic disaster could be avoided. Also, with all due respect, I never did consider gold to be an attractive long-term investment.
It's all in Adam Smith The authors of this book come close to identifying and pinpointing what the major cause of financial bubbles is and the disasterous impacts that affect large portions of the general population when they pop. They correctly give the first half of the story when they quote(p.238) Adam Smith's assessment that aggregate savings is a necessary ingredient that is vitally important in order to maintain aggregate economic growth over time once an optimal capital stock has already been accumulated in the present while the prodigal and other misbehavior destroys the possibility of economic growth.Smith,however,goes on to clearly identify what he means by misbehavior.Misbehavior occurs when the private commercial banks and investment banking houses on Wall Street take the savings of the population and waste and destroy it by making loans to projectors(J M Keynes' speculators-chapter 12,General Theory,1936)and imprudent risk takers(Keynes's lender's versus borrower's risk discussion in chapter 11,GT)instead of making the loans to the " sober " people who will invest it in starting new businesses and /or expanding existing businesses.The loans can't be made to speculators who will use the loans to leverage their speculative financial behavior.The private equity firms and hedge funds are using the capital markets to distort and manipulate the assets,liabilities,and equity of American business firms and corporations in order to use them to back an ever increasing number of new financial instruments, such as derivatives,lease-backs,sub prime loan backed bonds,etc.,that will create financial returns irrespective of any real increased productivity from the firms that are taken over by the debt financed leveraged buyouts.
What, then, is Smith's solution ? It is to prevent the problem from arising in the first place!! Fix the rate of interest on bank loans at a low rate marginally above the prime rate permanently in the long run.Cut off all loans to projectors,prodigals,and imprudent risk takers.Make sure the loans get into the hands of productive people and not Wall Street speculators.See Smith(Wealth of Nations,1776,Modern Library (Cannan)edition,pp.296-340 in general and pp.339-340 specifically) .Follow the wisdom of Adam Smith and you will not have to worry about days of financial reckoning and/or surviving the next " soft" depression of the 21st century.Brussee's book on this problem would also be a good choice as he ties the problem directly to the investment banking houses on Wall Street,although he is not aware of the fact that Smith spotted this potential ,general problem well over two hundred years ago.
Bill Bonner - king of "doom & gloom" newsletters His source of income is promoting "doom & gloom" newsletters and writing an ocassional book such as this one.
He recommends buying gold silver & digging yourself a hole in a ground to live in.
"The Sky is Falling!" = "Risk can't be transfered!" But Bonner and Wiggans did manage to pluck a subscription to their newsletter from you.
Chicken Little was in the woods one day when an acorn fell on her head. It scared her so much she trembled all over. She shook so hard, half her feathers fell out. Chicken Little: "Help! Help! The sky is falling! I have to go tell the king!" So she ran in great fright to tell the king. Along the way she met Henny Penny. "Where are you going, Chicken Little?" "Oh, help! The sky is falling!" "How do you know?" "I saw it with my own eyes, and heard it with my own ears, and part of it fell on my head!" "This is terrible, just terrible! We'd better hurry up." So they both ran away as fast as they could. Soon they met Ducky Lucky. .................. So they ran with all their might, until they met Foxy Loxy. "Well, well. Where are you rushing on such a fine day?" Chicken Little, Henny Penny, Ducky Lucky, Goosey Loosey, Turkey Lurkey (together) "Help! Help!" It's not a fine day at all. The sky is falling, and we're running to tell the king!" "How do you know the sky is falling?" "I saw it with my own eyes, and heard it with my own ears, and part of it fell on my head!" "I see. Well then, follow me, and I'll show you the way to the king." So Foxy Loxy led Chicken Little, Henny Penny, Ducky Lucky, Goosey Loosey, and Turkey Lurkey across a field and through the woods. He led them straight to his den, and they never saw the king to tell him that the sky is falling.
But Bonne and Wiggans did manage to pluck a subscription to their newsletter from you.
Anything Goes Trivia
Trevor
Megaton Man
