Aftershock (by Wiedemer et al)

This book should be required reading for everyone.

Ok, let me back up a moment and tell you what this book’s about, first.  It’s a “pop-economics” book presenting an overview of key pitfalls in the US economy.  It identifies 6 bubbles in the US.  Four have burst, 2 are still on deck waiting to happen.

The 4 that have burst:

  • Real estate
  • Stock market
  • Private debt
  • Discretionary spending

And the two bubbles left waiting to pounce:

  • The US dollar
  • Government debt

So why do I like it so much I think everyone should read it?

  • Dear lord, I think they’re right.  Since 2008, the US has tripled their money supply by pushing their printing presses to the limit.  Tripled.  Moreover, they’ve increased their borrowing nearly tenfold (from $0.16 trillion in 2007 to $1.4 trillion in 2010).  Despite this tsunami of cash, between 2007 and 2010 US GDP has increased a mere 4% (ish).  If that’s not a recipe for future inflation and a currency crisis to boot, I don’t know what is.
  • Additionally, US government borrowing is insane, and there’s no plan on how to pay it all back.  When you realize the damage and pain developing a payment plan would incur, it’s easy to see why the US hasn’t developed a repayment plan.  So, if the US isn’t planning on how it will repay its debt, what is it planning to do? (hint:  it’s default, if not directly, then through inflation)
  • After painstakingly identifying key weaknesses in the US economy, they give what I believe is a realistic assessment of how these issues will play themselves out (it’ll hurt) and also identify steps we can take to protect ourselves.

Despite all this great information, there were some things that irked me while I read.

  • They spend quite a bit of time patting themselves on the back for predicting the Credit Crunch of 2008.
  • They are financial advisers, and there are several plugs for their services.
  • They actually spend time identifying other books with a bearish view of the US economy and proceed to explain how their book is better.  Feeling a little insecure, are we?
  • Well, being Canadian I’d like to see a Canadian perspective on all this (eh).  What will happen to us as the remaining bubbles in the US economy pop?  They do mention what they think will happen to Canada in passing (hint:  1/3 of our GDP is earned selling stuff to the US, so it’ll hurt), but I’d like to see that fleshed out more.

All in all, I found it an easy read that targets the layperson.  Although it’s written for the everyman among us, they back up their thesis up with real economic principles and data.  From my background in economics & business, their assessment of the US economy seems spot on, so I have a sneaky feeling their predictions are reasonably prescient.  And if that’s true, then this is something we all need to take action on in order to protect our financial well-being.

4 thoughts on “Aftershock (by Wiedemer et al)

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  1. I would recommend This time is different: 8 centuries of financial folly instead. Not to many serious economists are currently worried about the US dollar or the deficit.

    1. I also read This Time is Different and like it quite a bit. A bit technical for a layperson, I thought, but a rich body of research with great insights. I’ve been trying to decide if the This Time is Different authors might find the lack of concern about the US$ and deficit a typical prelude to a bust.

  2. As a coauthor of Aftershock, I agree with all you have said — including your criticisms. Thanks for reading, posting, and spreading the word. It is not too later for each of us to protect ourselves in the Aftershock ahead. Unfortunately, most will not.

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