Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (Paperback)

by William Bonner (Author), Addison Wiggin (Author) "The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one..." (more)
Key Phrases: hangover theory, central hankers, mass capitalism, United States, Alan Greenspan, World War (more...)

Editorial Reviews

Review
"...The authors...come up with some disturbing conclusions..." -- The Journal, Newcastle, 5 February 2004

"...the book has rattled me enough to prompt further inquiry." -- The Telegraph, 13 December 2004

“This book is an intellectual tour de force.” (GetAbstract.com)

“…a very level-headed book for adventurous readers.” (Accounting Technician, May 2004)

This worthwhile, well-organized book presents insights into the current U.S. economy by comparing contemporary economic events with historical ones, especially such systems as Japan's in the 1990s and the United States in the 1930s. Find out why high-spending, high-borrowing consumerism leveraged the U.S. economy and also what the "soft depression" means for investors. (Best Business Books 2003, Library Journal, March 15, 2004)

"...The authors...come up with some disturbing conclusions..." (The Journal, Newcastle, 5 February 2004)

"...every serious investor should read this book..." (www.iii.co.uk (AMPLE), 6 January 2004)

"...the book has rattled me enough to prompt further inquiry." (The Telegraph, 13 December 2004) --This text refers to the Hardcover edition.

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

See all Editorial Reviews

Product Details

• Paperback: 306 pages
• Publisher: Wiley; 1 edition (December 6, 2004)
• Language: English
• ISBN-10: 0471696587
• ISBN-13: 978-0471696582
• Product Dimensions: 8.5 x 5.6 x 1 inches
• Shipping Weight: 12.6 ounces (View shipping rates and policies)
• Average Customer Review: 3.6 out of 5 stars See all reviews (65 customer reviews)
• Amazon.com Sales Rank: #367,745 in Books (See Bestsellers in Books)

• This item is part of The Agora Series.

Customer Reviews

Most Helpful Customer Reviews

166 of 171 people found the following review helpful:

4.0 out of 5 stars Provocative and Alarming, October 30, 2003

By	David R. Harper (Los Angeles, CA USA) - See all my reviews (REAL NAME)

This review is from: Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (Hardcover)

I think Bonner and Wiggin artfully present an alarming and important idea: that American consumer capitalism may doom the stock market and the economy. However, in making their case, they favor metaphors and provocation over tightly organized logic. The authors are truly right to call their approach "literary and historical," for many of the book's facts and hard data are attached to historical stories and anecdotes. The first two-thirds of the book is an epic-and sometimes meandering-sweep of selected economic themes and characters. Against broad themes, the writing is often ponderous but sometimes it is simply brilliant and poetical. The tone was a bit overwrought and patronizing for my taste. I winced a few times when, writing from their offices in Paris, they compare America to Rome before the fall, seeming to bask in their self-described spectator role, and taking glee in the perceived plight of the average investor, "bless their greedy little hearts."

I found the first three chapters hard trudging. Chapter One rehashes the bursting of the internet bubble and blames the Internet for amplifying the hasty judgments of the mob. Chapter Two aims to show us that every binge must be followed by a hangover, economically speaking. To prove this, they indulge in many, many military metaphors, like the Japanese "expansion" into Pearl Harbor that led to the hangover at Midway. I'm not much for military history so this was of passing interest to me, but I was interested in the introduction of Hyman Minsky and his theory that "stability [itself] is destabilizing." The idea is that when everything is going well economically, the banks and other "merchants of debt" will inevitably market their liabilities and send the economy into a vicious cycle of credit. Chapter Three tells the story of John Law's early attempt to create a paper currency and the ensuing speculative bubble; but mostly it a broadside against central banks who think they can save an economy merely by printing more money.

After this, with the exception of the Chapter Six, the book really started to grab my attention. Chapter Four presents the comparison between our economy today and Japan's ten years ago. Sure, the metaphor isn't perfect (e.g., American capital markets are arguably more nimble and ruthless) but I bet it will spook you if you have money in the stock market. Chapter Five dethrones Alan Greenspan and laments his reversal from a "gold bugger" (i.e., money should be backed by gold) to a devotee of managed paper currency whose overconfidence helped fuel the bubble, and who, the authors plainly believe, cannot save us with interest rate cuts. Regarding Chapter Six, I'm with another reviewer who thought this part was tough. It's an abstract philosophical treatise on why the masses are, you know, bunk. Maybe they needed to make a place for the obligatory Nietzsche quotes? I would have much rather they elaborated on their all-to-brief discussion of fiscal policy, where they start to make a case for the dangers of a Bush-inspired expansion of fiscal spending.

Chapter Seven (The Hard Math of Demography) is a great chapter and is the heart of the matter. Whereas in the earlier Chapter they drew the cosmetic analogy to Japan ten years back, here they outline the causes that doom us to repeat Japan's performance. Drawn largely from a study by the Cowles Foundation, they show that the stock market has historically trended along with demographics. Specifically, when the proportion of people who are "peak-investors" (i.e., people in their 40s) is high relative to spenders (in their 20s) and retirees (who pull money out of the market), then demand for equities runs high and the market rises. But this ratio has recently peaked, and we are looking at two decades where the proportion of investor-aged population is going to decrease as more people move into retirement and will be selling, not buying, stocks. This is the authors' concern: that as American depends increasingly on debt-financed consumer consumption, fewer investors will demand equities, so we will have less investment capital. Compelling, but the authors did not cover all their flanks. For example, they do not seem to acknowledge that consumer spending provides companies with revenue and retained earnings that can be a source of investment capital; they seem to imply throughout that the only investment capital comes through savings which are invested in the equity markets. Also, you can argue that the historical comparison between U.S. Equity markets and domestic demographics is challenged going forward given increasing globalization. In other words, the US stock market hardly depends only on domestic investors for demand; as we mature, other economies are supplying plenty of prime-aged investors.

So this is a worthwhile debate for any long-term investor and this book is sure to make you think about the risks in holding equities into the next decade. I was not at all disappointed that the authors' go-forward advice amounted to "sell equities, buy gold, we think." It was a welcome bit of humility from them. But the book is really a case for selling equities, it is not by itself a very persuasive argument for buying gold, unless you simply believe that historical inverse relationships between the two asset classes is going to hold up.

131 of 137 people found the following review helpful:

3.0 out of 5 stars Another Good Informative Perspective Worth Reading, November 8, 2003

By A Customer

This review is from: Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (Hardcover)

The reviews the book got were mixed. I think one of the important gripes was that the book doesn't offer advice on what to do going forward like the title implies. It appears that gold may be a worthwhile investment, but the authors make it clear throughout the book that wealth just doesn't come out of thin air and that the US has been heading in a bad direction for a long time. Stocks, they say, are still overpriced and the market will (as always) return to the mean.

One of the things the authors illustrate is a chart showing the cycle of bear and bull markets, and how they tend to last 15-18 yrs. If that trend holds, then we've got another decade or so before we see another bull market. Another point they make that I found interesting is that a person's maximum salary occurs at an average age of 46. Up to that point, those people are buying stocks and consumer goods, pushing the stock market up. After age 46, those people begin to start selling stocks more than buying them. Plus, they begin to make fewer and fewer purchases. Where this comes into play is with the Baby Boomers. The beginning of the BB age was mid-1950's. When you add 46, you get roughly year 2000. That's when our market peaked. The implication is that our aging population will no longer be contributing to the stock market's push upward, just the opposite. And when you consider that there are 70-80 million BB, then that's an incredible force to be reckoned with.

While I was disappointed in the lack of direction the book offers, it was a worthwhile read. The authors did a good job researching the material, and the chapters were easy enough to read once each night. The book is mostly a historical account of monetary systems and it isn't until the last few chapters that the here-and-now stuff is discussed. The authors do tend to make simplistic arguments which I thought was an oversimplification of the problem. They also make a comparison with Japan, which I keep hearing the finance types talking about, so it was educational to read more about why a comparison is warranted.

Another good book is "Rational Investing in Irrational Times." It's premise is that diversification is the only way to make money in the market, especially when you can diversify using index funds. "Rational Investing" makes the important point that there are only a few days in the year that make a difference in a stock's price, so you'd better be in the market when those days occur. "Rational Investing" looks at the market from a purely statistical perspective and presents a methodical approach to investing. In contrast, "Final Reckoning Day" looks at the market from a centralized money management and demographics perspective.

Overall, the authors resign to the fact that we simply don't know what will happen next. And each time we try to do something, we change the system somehow, creating new variables. If anything, what I've gotten out of these books is that (1) the buy and hold strategy is a myth, (2) history repeats itself in almost predictable cycles, (3) our monetary systems are incredibly complex when you try to make forward projections, and (4) finanical analysts are making guesses at best. Books like these really should be made part of the high school curriculum so young people can start developing opinions on the matter and be better prepared to make the right financial decisions in their lives.

46 of 49 people found the following review helpful:

4.0 out of 5 stars Marshalls a lot of economic facts, October 24, 2003

By A Customer

This review is from: Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (Hardcover)

This is a worthwhile read. The authors portray the USA in a worrisome light using a lot of insight and comparisons of the present with historical economic events, some quite famous and interesting in their own right. However, they do not quite get the connection between massive trade deficits/surpluses and their multiplier effects on banking systems, leading to disastrous bubbles. They seem to feel it is substantially all monetarist activity at the FED, which certainly is a major contributing factor to our present bubble. This book should be read in conjunction with The Dollar Crisis by Richard Duncan in order to understand the cental bank role and get the true macro picture of excessive liquidity and why we are in a liquidity trap.