Not long ago, I finished reading Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown. This book was written by David Wiedemer, Robert Wiedemer and Cindy Spitzer, three “renegade” economists who tend to be contrarian toward conventional wisdom. They might be written off with other “prophets of doom” except for one thing: their previous book, America’s Bubble Economy, which was published in 2006, very accurately predicted the housing collapse, the investment banking collapse, and the major recession that hit the US (and world) economy in 2008. The authors said in the first book that economic growth since the early 1980s was driven by a series of “bubbles” – artificial inflation in housing prices, the stock market, “net worth”, etc. – and not by real growth in productivity or market value. If you look at it logically, how could housing prices rationally rise by 100% during a time when real wages rose only 2-3%? The answer is, they can’t unless they are being artificially inflated by speculation. So for all the blame being passed back and forth between Democrats and Republicans, the existence of these “bubbles” was fairly easy to see without a PhD in Economics.
Now in Aftershock, the authors say, in so many words, it ain’t over yet. While all the politicians and stock market cheerleaders are busy proclaiming we are on the road to recovery, the authors say there are two more bubbles yet to burst: the “government debt bubble” and the “dollar bubble”. Honestly, I wouldn’t give this book half as much credibility were I not hearing the same message from Mike Dillard, founder of The Elevation Group; Jay Kubassek, the founder of Carbon Copy Pro; and Robert Kiyosaki in his book Conspiracy of the Rich. I’m continually amused by the political “blame game” for the exploding US national debt, because I’m old enough to remember Lyndon Johnson trying to tell the US public that we could afford “both guns and butter” during the Vietnam war. It wasn’t true then, and it isn’t true now. Every single US President and Congress since LBJ has, in one way or another, told the same lie about spending – and that includes 5 Republicans and 4 Democrats by my count. Yes, deficit spending ballooned explosively during the final year of George W. Bush and the first two years of Barack Obama, but it all began back during the 1960s. What we’ve seen recently is just the “chickens coming home to roost”, as we used to say down where I grew up – the futile attempts of the power elite to keep their house of cards from collapsing. Every family knows you can’t run up your credit cards forever and get away with it.
The Aftershock authors make the following bold predictions: within the next 3-5 years, the US government will actually reach the point where its foreign investors will no longer be willing to loan them more money. At that point, the US government will do the unthinkable – it will default on its loans and “start all over again” – effectively declaring a national bankruptcy. But there is a consequence. Without being able to borrow money, the government will be forced to balance its books to the maximum possible extent. Large portions of the US economy (including the industry I worked in for 45 years) are dependent on government spending to keep them alive. The combination of much higher taxes and drastic reductions in federal spending will cause the stock market to collapse to roughly 25% of its current value. Unemployment will rise to Great Depression levels (20-30%). I predict you will see a major stock market “correction” in early 2011 when the Bush tax cuts expire. Millions of Baby Boomers will see their retirement accounts take a major hit for the second time in two years. And that’s only the beginning.
But there’s more. Besides spending money we don’t have, the other major financial mistake the government has made is to continually devalue our currency – the US dollar, no longer backed by gold, floats with other world currencies. Many other nations depend on the strength and value of the US dollar for their own currency’s stability. The government devalues our dollars by simply printing more paper money when they want to keep spending. When the “dollar bubble” finally bursts, there will be rampant, double-digit inflation (10-20%). Hyperinflation in US dollars will impact all world currencies. The authors of Aftershock say it will take almost 20 years for the world economy to recover from these “aftershocks”, but when it does, things will be “better”. By that, they mean the world economy will return to sanity.
Will these things actually happen, and if they do, how can a person protect themselves and their wealth? These authors say the critical actions to take are to get completely out of the stock market as soon as possible (including all the funds in your 401-K); get out of real estate investments; and get out of long-term bonds and fixed rate investments. Well that doesn’t leave much other than silver and gold. Even with gold, they say to be careful. Read the book if you want details.
Now I’m not sure if things will actually reach the point predicted in Aftershock, although it’s certainly troubling to see other people I respect voicing the same concerns. And as an old military guy, I have other worries these authors seem to be naive about. They don’t see this economic turmoil leading to war, but I do. Look at what happened to Germany in the 1930s based on hyperinflation and economic depression. Will it happen again? I hope not, but I wouldn’t rule it out. Many wars have been started because of economic downturns and scarcity. It could happen again.
But what can we do as individuals to protect ourselves? First, we can hold our local and national governments accountable for spending. Second, we can turn to the one income source that does not seem to be impacted by the various collapsing bubbles: the Internet. I created this website to advise and help people who want to tap into the Internet Gold Mine. The time to get involved and create your own gold mine is now. You don’t have much time left. Learn all you can as quickly as you can about how to create a viable business on line that has a strong cash flow. As Robert Kiyosaki would say, if there is no cash flow, your business is a liability, not an asset. Stayed tuned to this website and others where you can find help. Uncertain times present opportunities as well as obstacles. See the opportunities.