Aftermath Book Review – Rickards’ Latest and Greatest
“Society does not get endlessly richer and more sophisticated. Periodically things collapse. It is not the end of the world. It is the end of an age.” ~ Rickards – The Road to Ruin – pg.297
Change is coming, I can feel it.
My sample size isn’t overly large, but in my life, I can’t remember society being as polarized between left and right as it is today. It isn’t just Canada and United States, either, it seems to be a good portion of the world.
So, why does it matter? Well, in my view, the root of where we are economically begins with the culture of the society. In this case, I’m referring to western culture or, more specifically, the derivatives of western culture which are found in Canada and the United States.
Western culture is of particular importance because its ebbs and flows, presently, have such a profound effect on the entire world. In fact, I would suggest that what I’m feeling is actually the degeneration of western culture and, in effect, the fall of the global economy as we currently know it.
For all intents and purposes, the United States represents the peak of western culture, as its rise to the world’s top power over the last 100 years has been predicated on all the ideals, mainly liberty and freedom, which allow the free thinking individual to prosper.
Instead, today we are headed on a path toward destruction. This path is one which is moving to remove the liberty and freedom of the individual and increasingly to replace it with government oversight, effectively removing an individual’s responsibility of choice.
In essence, the left and right are fighting to establish who knows best for everyone else. This will ultimately end in the failure of the western culture and, along with it, the collapse of the global economy in its current form.
Today, I have for you a review of James Rickards’ latest book, Aftermath – Seven Secrets of Wealth Preservation in the Coming Chaos. Aftermath is volume 4 in a quartet of books that included Currency Wars, The Death of Money and The Road to Ruin.
Much like the previous three, Aftermath doesn’t disappoint as it sets out a blueprint for wealth preservation in the coming chaos.
Let’s take a closer look.
Aftermath – Seven Secrets of Wealth Preservation in the Coming Chaos
Much like Currency Wars, The Death of Money and The Road to Ruin, in Aftermath Rickards uses both his experience and financial knowledge to outline his thesis for why a reset to the global monetary system is inevitable.
The chapters in Aftermath are broken down into topics, the ramifications of which could individually or collectively trigger the next global economic meltdown.
In my own words, here are the 7 topics that Rickards covers:
- Tariffs and Trade Wars
- Debt to GDP Ratio
- Behaviour Economics
- Passive Investing
- Velocity of Money
- Global Monetary Reset
- Terminal Unit
Each of the topics is deserving of its own chapter, however, I particularly enjoyed the information Rickards provides on the debt to GDP ratio and behavioural economics. In my view, these 2 topics are of particular importance because I think that, ultimately, a crisis in the global economy will start with them.
Specifically, I believe quantitative easing (QE) and low interest rates are to the market as drugs are to an addict. Therefore, pick your poison; more QE and low interest rates that will lead to an overdose, or go cold turkey, which will lead to the tremors and, most likely in this case, death. Either way, change is on the horizon.
Debt to GDP Ratio
Currently, the United States debt to GDP ratio sits at roughly 105%, a level which Rickards explains is considered by most economists to be above the point of no return. Once an economy reaches these critical levels, the growth of the economy is destroyed as any profits are directly fed into servicing the debt.
Japan is a great example of the effects of a high debt to GDP ratio, as the Japanese economy has been stagnant for multiple decades.
The obvious question then is, can’t the U.S. expand their debt to GDP ratio to the extent of Japan and still avoid a crisis? The answer is probably not; there would be a crisis of confidence before it reached the levels of the Japanese economy.
“The U.S. debt to GDP ratio is approaching the point at which it cannot expand much farther without inducing a crisis of confidence” ~ Aftermath
Firstly, while Japan’s debt is much larger than its GDP, the saving grace for the Japanese, in my opinion, is the fact that the Japanese people are its largest holders of its debt. Because of this, I believe there is a level of protection that the U.S., for example, doesn’t have.
Second, while the U.S. does appear, superficially, to have room to grow its debt to GDP ratio, the potential lack of confidence in the U.S.’s ability to service that debt begins to heighten. Unlike the Japanese, a good portion of the U.S. debt is held overseas and, thus, presents a major hurdle to further expansion.
Dwindling confidence will snowball and surely cause a major economic crisis. America’s debt to GDP ratio is in risky territory. In the chapter, ‘Putting out the Fire with Gasoline,’ Rickards walks you through the history and risks associated with debt to GDP rations and, most importantly, provides a tip for protecting your wealth against this major risk.
Human Behaviour
“Are humans risk adverse slugs or overconfident pretenders? The answer is both, depending on past circumstances and current conditions at the point of decision. This behaviour contradiction, one of many, illustrates why it is so difficult to make sense of human behaviour in markets” ~ Aftermath
We all have cognitive bias that affects the decisions we make. More specifically to the basis of this book review, it is the bias-laden investment decisions that many of us make that pose a major risk to the economy.
In the investment world, there is a tendency to follow the herd into buying the most popular stocks – for example, the FANG stocks (Facebook, Apple, Netflix and Google) or using the most popular investment techniques, such as passive or index investing. While the herd mentality can sometimes provide short-term profits, over the long haul, it typically ends in losses.
Currently, we sit at a very risky juncture in the stock market, where it sits at all time highs. All time highs mixed with the hyper-synchronicity investments is extremely dangerous for both the individual investor and the market as a whole.
If or when losses begin to mount, it will have a contagion effect on the market and, undoubtedly, lead to what could be major losses.
There is so much more to this topic which Rickards covers in the book – I won’t spoil it. Understanding this one chapter in the book could make all the difference in preserving your wealth.
Concluding Remarks
While it is easy to get caught up in the ‘when,’ as in when will the crisis occur, it really is a waste of time. No one can predict when complex events such as a global monetary reset will take place. In my opinion, it’s important to continue to live life as you normally would, but with some added financial prudence.
In my view, Aftermath is a MUST read for everyone, not just for those who are focused or interested in the global economy. The benefits of understanding the ramifications of what has happened in the global economy over the last 10 years is integral for understanding where we may be headed.
In Aftermath, Rickards lays out the groundwork needed to protect your wealth in the future, no matter what’s around the corner.
While it may not be imminent, it does appear to be inevitable that a global monetary reset is on the horizon. Read Aftermath, The Road to Ruin, The Death of Money and Currency Wars – you won’t regret it!
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Until next time,
Brian Leni P.Eng
Founder – Junior Stock Review
Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs.
