Monday, May 28, 2012

Aftershock by David Wiedemer

I can't add a whole lot to the very thorough review of this book I posted earlier by my friend, John. This 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.

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