The Second Great Depression Paperback – Mar 2005
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Most Helpful Customer Reviews on Amazon.com (beta)
The second part of the book states that as the economy slows, the stock market will drop. The author uses several methods to estimate how far the market will drop, including Yale Professor Irving Fisher's formula that uses dividends for deriving real market value.
The third part gives conservative savings calculations for retirement. These calculations differ from those in most books because they don't include stock market gains, and they assume that Social Security retirement benefits in the future will be delayed until age 70.
I liked this book a lot because it backed up all its conclusions with data; sometimes almost too much data to digest. But the inclusion of this data, the focus on consumer spending, and the willingness of the author to extrapolate as to when the consumer debt limit will be reached, separates it from other books predicting generic economic problems `some time in the future'.
I was surprised to read the very negative rating of this book by an earlier reviewer. The fact that the author graduated from Cleveland State University in engineering and was a former GE Engineering Manager is right near the front of the book, so I don't understand the surprise. This book is very data oriented, and the author's earlier books on Six Sigma seem to validate that he has expertise in data analysis. As for not suggesting selling stocks short, which has a risk theoretically greater than the amount invested; this is consistent with the author's apparent conservative approach for riding out the first half of the predicted depression. I, personally, would consider gold more strongly as an option; but again, the author is very conservative.
This book and "Empire of Debt" say the main problems with the USA. We have too much debt. Nearly every household in America carries over $10K just in credit card debt. The average household in the USA only makes $45K per year. That means they carry nearly 25% in unsecured debt. This does not count car loans, household loans, and other financial obligations.
Since this book was written it has been largely coming true in Michigan. On 18 May 2006 the unemployment rate in Michigan is nearly 8%. Economists will bluntly tell you that it's underreported and the real level of unemployment is 12%. That is hard recession if not depression levels for an area.
However, while States like Michigan are dying you can count on Washington D.C. to fiddle. Has Federal regulations been limited? No, and this book says quite a bit about the anti-business climate of our government. Can this nation look for energy? No, and this book says that higher energy prices will be one of the causes of the coming depression of the '07 years.
There are so many factors out that can cause panic in the financial markets that it can give sleepless nights to anybody who knows a lot about finances. Federal Spending has caused a record debt of over 9 trillion dollars. The GDP is only 15 trillion. State and local governments all have massive amounts of debt. Then there is consumer debt. The aggregate result of all these debts is this country just has a pile of IOU notes to each other. Note, Brazil and Argentina had near problems in the late '70s. Brazil found oil and may recover. Argentina is near poverity. Debt is toxic. Nobody in government knows that. All the citizens in this nations, along with the illegal aliens, want "free, free, free" and never figure out it has to be paid for some way.
This book is largely coming true. For some people it's merely the obvious. There are many people who do not want to know the truth. What can be said? Many people who were on the Titanic didn't think there was a problem until the water went over the bow.
This is an excellent introduction to our economic problems. This is a rare five star book that is very readable and makes sense to the average American.
The only trouble with this book is its coming true.
But I'm not saying this book is unrealistic. While the author does devote a few pages to cinematic doom stuff, it felt to me as though the scary "depression" theme was grafted at a late stage onto a fairly run-of-the-mill book on conservative investing strategies and retirement financial planning.
What's WB's limited imagination apparently does not extend to are things such as Peak Oil, World War III, a pandemic of Extinction Level Event magnitude, runaway climate change, and so on - though I'm not saying that he should have explicitly addressed all that in a single book on his single subject.
My point is that he spends so many pages on very detailed calculations and tables around mild stuff like how to re-invest in the market, how to get an extra percentage point here and their in your retirement savings - all the while apparently oblivious to the strong possibility that a depression of the magnitude he envisions could well trigger or be grotesquely compounded by any of the above singularities and more - it would then be a total bonfire of the certainties. Thus his mildly scolding, timidly middle-class schoolmarm'ish tone didn't always seem to match the content of his message.
I was just reading through his chapter 4 on what the depression will look like and the predictions he made for the present time frame are a virtual carbon copy of the actual headlines in the financial news of this year.
Some criticized his great specificity of predictions. That is indeed a very risky thing to do. I would be satisfied with a book that made predictions of a much more general nature if I found that it had done a decent job of anticipating the general trends in the economy.
But Mr. Brussee insisted on making a whole slew of very specific predictions. And guess what, the vast majority of what he predicted for the present time frame has come to pass!
Brussee appears to me to be one of a number of people who have independently come to similar conclusions about where the economy is headed. Although there is a great deal of commonality in the beliefs of these people (e.g., the central role that an ever-expanding spiral of debt has in creating the economic woes we now face), I find it interesting that this what now probably should be referred to as a "contemporary school of economic thought", did not arise from a bunch of inbred cronies in some ideologically-permeated academic institutions, but instead has emerged from a bunch of disparate individuals within our society who share one common characteristic- an unwillingness to accept the spoon-fed economic notions of the "don't worry be happy" (DWBH) school of economics that dominates the financial media, an establishment epitomized by the likes of Larry "King Dollar" Kudlow.
I am very pleased that the renegades have a wonderful media outlet for their particular perspective, namely Jim Puplava and John Loeffler's financialsense.com. (and, financialsense also provides an outlet for a considerable diversity of views, although you won't see many articles posted there by adherents to the DWBH school of economics, but no need for that since they have the entire rest of the financial media to get their point of view out.
There is a lot of financial commentary today by the "renegades" (perhaps the best term for them is the "sound money" advocates, alhthough that is only one attribute of this economic philosophy, it seems to be the one most consistently a part of those in this (loosely-defined) group.)
However, one thing to keep in mind with Mr. Brussee's writing:
HE WROTE THIS BACK IN 2004, FOR GOD'S SAKE!
I was not following the financial writings back then that I am today, but I am confident that there was very little being written at that time with the clarity, detail, and foresight, of this book.
When I think about: "What have I learned from this book that is new?"
The concept that Brussee espouses that is most new to me is the contention that the credit crisis has been building for the past couple of decades and that the US would have been in a depression in the 1990's if it had not been for the artificial stimulus of consumer debt expansion.
I always thought our current economic crisis began with the tech bubble.
But I find Brussee's hypothesis on the matter to be persuasive.
Now there have been reviews complaining about the latter part of the book and all the graphs and stuff. Thank you for those reviews. I think I will probably not bother to read the rest of the book.
So how can I give it 5 stars? Because part I of the book, if it were a standalone book, would be worthy of 5 stars. If you feel you must judge the entire book, I encourage you to tear out pages 85 and beyond first and then judge the full book.
The one other substantive matter I wanted to bring up is that some reviews commented on the lack of investment advice in how to deal with the depression, and also the author's affinity for treasury protected securities.
I don't feel there is any obligation for such a book to include investment advice. The opposite extreme I guess would be the book "Profit from the Peak" about peak oil, which is really a tutorial about peak oil much more so than a guide to investing in a peak oil world.
(by the way, the author's foresight was evident also in the chapter "What Else May Trigger the Depression" which included a very prescient discussion of the risk of high energy prices.)
Where was I? Oh yes, treasury protected securities. Unless the author discusses it in part II, one thing he does not assert in the book is the belief held by most SM advocates that the government's formulas for inflation tend to understate what would be calculated under a more meaningful and relevant definition of inflation. Hence, treasury protected securities are probably nearly as worthless garbage as regular treasury bonds.
So, there are my two criticisms of the book:
1). Part II looks so dry, and I have been forewarned about it, that I am not even going to read it.
2). Author does not express contempt for the government's inflation numbers.
Other than that, this was in my view one OUTSTANDING book.
One other thought about the question of investment advice: If the author indeed has done a good job of predicting the economic trends going into 2020, then it should be possible for one to translate that into specific investment decisions without explicit advice on what to invest in.
In fact, specific investment advice may be risky. In the book "Profit from the Peak" the authors for example recommend US oil refiners who can handle heavy sour crude. However, oil producing nations like Saudi Arabia whose new production will increasingly be of the lower grade "heavy sour" variety are interested in building refineries themselves so that they can generate more of the revenue from their oil and provide more domestic jobs.
But, I do have one piece of investment advice which is forget about Treasury Protected Securities as any sort of safe haven in an inflationary depression.
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