Posted by Tim Stobbs on January 15, 2009
Well another excellent book recommendation from another reader. I’m really spoiled as you guys tell me about all these great books! Crash Proof by Peter D. Schiff is a most enlightening read despite being written in 2006 and published in 2007. Why? Because it basically told us that the crash of 2008 was going to happen.
WHAT?!? Yep, you read that right. The author had saw the bubble and knew it was going to blow. He wasn’t sure when, but knew it was coming. The book deals with the fall of the US economy specifically and lays out the economic reasons why its going to happen and some of the bullsh!t that the US government was saying trying to keep a lid on it and the keep the party going as long as possible.
It was a VERY interesting read for the fist seven chapters which dealt with the background to the problem. Perhaps the most interesting things I’ve learned was about inflation and the insanity of the Social Security system.
First off I learned inflation is actually the expansion of the monetary supply. More dollars in play means reduced purchasing power. This is actually a very good thing from the US governments point of view, but bad from a taxpayers point of view (I won’t get into all the details, it’s too much to cover in one post. Mmm, maybe I’ll deal with this next week). Also how the government has been basically hiding that fact that inflation is as high as it is(which anyone living in the US already knows).
Second, I learned that Social Security is just invested in US government bonds. Which means the government is basically paying itself. What?!? Ok, Social Security payments come into the government. They buy US bonds with it. Who gets the money? The US government, who can now spend it on anything they like. Wow, what a load of BS, eh? At least Canada’s government has the decency to say that Old Age Security comes out of general government revenues. Thank goodness the Canada Pension Plan is invested elsewhere.
Now the book then starts to fall apart in the last three chaptes where Peter starts to recommend how to avoid the crash. His basic rules are: don’t have money invested in US stocks or even US currancy (because he expects the US dollar to collapse in the near term), buy gold (because it will go up in value) and keep a large cash reserve to cover some expenses after the crash as well as pick up some investments.
The gold idea and the cash reserve make some sense. I generally agree with those concepts. Gold is a traditional safe investment in down times and cash is logical. My beef is with the avoid everything US. Why? Because there are a lot of big US companies that get a lot of income from foreign markets. Even if the US dollar collapses they will still have a fair amount of non-US dollar income. Now obviously that applies to only some companies, but I think Peter was getting rid of the baby with the bathwater by saying avoid all US stocks.
So who else has read the book? What did you think? I’m interested to hear other points of view.