on November 18, 2009
I have followed Bonner over the years and have appreciated his perspective. This book however was a major disappointment. The book just doesn't cover what the title (and subtitle) states that it is going to cover so from the get-go it is misleading. It spends most of its time doing a haphazard and rambling discourse on the economic history of the last 100+ years with wayyy too much time spent on Japan and Greenspan. The title of the book is "Financial Reckoning Day: Fallout"............precious little space is devoted to the current fallout from 2008-2009. Most of the pages are devoted to 1960-2002. It merely covers the ground that we've all heard ad infinitum over the last two years already in the media/CNBC, nothing really fresh at all and more importantly he does NOT spend much time covering the 'Fallout" scenarios yet to come .
The subtitle is "Surviving Today's Global Depression." You would think, therefore, that there would be pages devoted to 'what you can do in such a depression'. You would be disappointed. Only the last page or so even attempts to address that topic but wanders from it immediately. All Bonner states in gloomy repetition can be summarized by the last sentence in the book: "Our advice? Fold 'em, get up from the table before they clean you out'. I was expecting better and more detailed advice and strategies from someone as experienced. The book is a real downer and I got not one good idea from it.
on August 11, 2009
Bonner and Wiggin are great writers and wonderful at relaying what went wrong in the markets and what we can expect from here. I was a fan of Wiggin's book IOUSA and think this one takes those ideas even further.
The book explores the major correction underway in the US market. According to the author's "the feds' efforts to stop the progress of capitalism will have some spectacular consequences." The first edition of the book was right in its assumption that the US market was heading toward tough times, and based on their perceptive research, I believe their latest set of predications: "Advice to the Class of 2009" (as they put it).
This book will make you think about the risks that you take before you invest and more importantly before you make choices that effect your financial future. Do you really need to take out another line of credit? Living within your means will save you in the long run, and Bonner and Wiggin understand that. Chapter 3 is one of the best looks at the history of the "price of progress" and how a mix between a lack of foresight and an insatiable appetite lead to the economic downturn. I found the writing in the book engaging and often humorous- that's often tough to find.
on October 22, 2009
Financial Reckoning Day Fallout is a collection of history and opinion explaining the lead up of the 2009 Depression. (I think this is a Depression, not a Recession).
This book is not cohesive as The New Empire Debt which maintains the idea the US is practically an empire. This book is a loose collection of history and opinion. I did not enjoy Financial Reckoning Day Fallout as much as the New Empire of Debt.
I would, however, recommend this book to those who want a deep understanding of the current state of the economy.
The highlights in this book are the following:
- the reason why fiat money is a flop
- the influence of demographics, such as the Baby Boomers, on the economy
- the ongoing Japanese recession
- the history of Alan Greenspan.
on February 23, 2011
Deacm's review pretty much covers it. This excruciatingly long book has some interesting stories, but meanders from topic to topic much like a drunk in search of a new bar (the authors like to make statements like this). Basically, the book argues that fiat currency never works; that Allen Greenspan did nothing other than create the greatest bubble in history; that financial collapse is inevitable; that gold is a good idea, but it's probably too late at this point to do anything.
As far as "surviving" goes, there is nothing here. Nothing at all. That is why the title is so misleading. There are lots of books that argue the same basic point. Peter Schiff and Bud Conrad come to mind. At least they have some ideas about what to do.
This book is in desperate need of good pruning, but the best decision, in my opinion, is not to waste your money (even if your dollars are not worth very much!).
on September 27, 2010
I took the bait on a business-book-for-a-buck posted on dealnews a couple of months back. Authors Bonner and Wiggen have not disappointed in this decade update of the economic situation we find ourselves in. Agree or disagree with the content it provides both a pithy analysis and a fun ride for anyone who has ever hesitated to pick up a book on economics.
The 12-page Preface alone was worth the price of admission with it's four basic truths about the stock market, housing and the economy: 1. People do not get what they want or expect from the markets; they get what they deserve (are you still with us Mr. Greenspan?)2. The force of a correction is equal and opposite to the deception that proceeded it (mirroring the economic model that was Japan 10 years ago) 3. Capitalism doesn't always take an economy where it wants to go; but it always takes an economy where it ought to be (can anyone say "legacy for our grandkids?") 4. The severity of a depression is inversely correlated with government's effort to stop it (thank you Mr. Obama).
I am so impressed with this book I find myself in the midst of a re-read of it's 400 pages. And yes the book's value (to this reader) far exceeds the price I paid for it.
The big commercial groups own Japan's production and these groups borrowed money from big Japanese banks. In the 70s and 80s as stock prices went up and savings went down. Japan entered an age of consumption and they loved it. Japanese stocks between 1971-85 went up 500 percent, 1985 - 1990 stocks had tripled, 1990 stocks peaked and within an 18 month period dropped 30 percent. Japan became the largest net creditor in the world. Japan was different from America in the following ways: 1. Japanese saved 13 percent of their income 2. Japanese believed in the philosophy of "WA", the belief all citizens must stick together. 3. Japanese were ashamed if they let the group down. 4. Japanese worked fewer hours and paid lower taxes than Americans. 5. Japan had a well functioning social service system. 6. Japanese women lived longer than any other group in the world.
In 1980, Japan had become an economic marvel, a self-sufficient economy. However, the Yen rose 40 percent and exports were twice as expensive, corporate profits were in decline, causing the GDP to cut in half. The Bank of Japan reacted cutting 1986 rats to 3 percent. Stocks became an obsession for the Japanese investor.
In 1987, Nippon Telephone and Telegraph (NTT) went public. When the Japanese government offered NTT, 10 million people applied to own shares in NTT without knowing the price. Japanese wanted to buy Japan. Bonner says, the public had a strong sense of confidence and the people thought Japanese collective capitalism was permanently successful.
In 1987, share prices rose, land prices rose over four times the property value of all the United States, multigenerational loans emerged, a new people started consuming and had a taste for luxury items. This new group of wealthy people loved consumption.
In 1985 the dollar equaled 122 yen. The Japanese government thought the dollar was too low and cut rates to 2.5 percent hoping Japanese companies would become more competitive. The interest rate cut pushed NTT valuations to $376 billion, Japan Air Lines traded at 400 P/E, Fishery and Forestry traded at 319 P/E, and the shipping industry traded at 170 P/E.
The new generation of government spending created by credit could not last forever. Debt peaked at 130 percent of GDP. The credit financed a spending binge. From 1985-1990, bank-lending rose by $724 billion and consumer credit card rose 700 percent. 95% of the credit was domestically owned. Japan was a net creditor to the rest of the world amounting to 10 percent of GDP. Credit fueled buying.
Companies paid no extra salaries. Credit sales appeared in the bottom line as company profits. Credit lead to higher sales, higher profits, and all this sponsored the belief that demand was increase and supply should expand. So new factories were created, new products offered, and new employees hired. Consumer spent their savings, but dis-saving could not last forever. A decisive moment occurred for no particular reason when spending could not continue. The confidence felt during borrowing and spending freely ebbed away. Japan started to feel deflation forces. The economy contracted with fewer new hires, sales and prices dropped, investors unload stocks at lower prices, overtime was reduced, new expansion projects were set aside, and a new spirit of consumer spending restriction set in; a new spirit of thrift, bankruptcy, and debt cancellation took over.
In 1990, the Nikkei fell 5 percent in 3 days, in Feb the Nikkei dropped 4.3 percent in 3 days, Long Term government bonds fell to 7.3 percent; commercial banks raised lending prime to 6.5 percent; Bank of Japan raised the discount rate to 5 percent; stocks continued to fall; the market raised concerns over oil prices caused by the crisis in Kuwait and stock prices dropped 11 percent in one day; and the Bank of Japan raised the discount rate to 6 percent.
In 1991, the Bank of Japan initiated a loosening monetary policy; the discount rate was cut from 6 to 5.5 percent and by Sep 1993 the discount rate had fallen to 1.75 percent and by 1995 the rate approached zero. As the bank rate fell the loans loss reserves mounted and in 1993 the central bank wrote off 4.3 trillion yen; by 1994 another 5.76 trillion yen was wrote off; and in 2003 Mizuho Holdings announced losses of 1,950 billion yen. In 1994, consumer prices began to fall; prices deflated for the first time since WWII; consumers start spending at 2nd hand stores; banks slowed down issuing of loans; employers reduced salaries. Between 1992-1995 Japan erased 17 years of stock market gains. From 1984 over the next 11 years, investor lost 75 percent of their money; fortunes were ruined, the wealth slipped away, and unemployment rose to 5 percent from nonexistent. Japan's corporate debt was 225 percent of GDP verse 55 percent of GDP for America. U.S companies were in better shape during the 90s because Japanese money was moving to America.