Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown, 3rd Edition

Preface to the Third Edition of Aftershock

Judging from recent media reports in 2013, as well as the forecasts of many investment professionals, it appears we have passed the financial crisis (which we know was caused by the early popping of the bubble economy), and there will be no Aftershock.

That would be welcome and comfortable news—if only it were true.

Instead, what has happened since the 2008 financial crisis is just as we predicted in our earlier books. As the four interacting bubbles (stocks, housing, private credit, and consumer spending) pop, they will put enormous pressure on the two remaining—and much more fundamental—bubbles in our bubble economy: the government debt and dollar bubbles.

That's because there has been an enormous incentive to further inflate the government debt and dollar bubbles in an effort to stall the popping of the other bubbles. And that is exactly what the government has done in two ways. First, it has increased its annual deficit by almost 400 percent from $167 billion in 2007 to almost $1 trillion in 2013, pumping up the government debt bubble. And even more stunningly, it has increased the U.S. money supply by an unthinkable 200 percent (from $800 billion in 2008 to more than $3.6 trillion as of the end of 2013), pumping up the dollar bubble.

By inflating these bubbles even more, we are temporarily preventing the other bubbles from deflating further and, in some cases, such as the stock market, we are actually reinflating the bubble to some ...