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

CHAPTER2

America's Bubble Economy

UNDERSTANDING HOW WE ACCURATELY PREDICTED THE FINANCIAL CRISIS OF 2008 IS KEY TO UNDERSTANDING WHY OUR LATEST PREDICTIONS ARE ALSO CORRECT

When our first book, America's Bubble Economy, came out in 2006 (the book proposal was actually submitted 18 months earlier), we were right and almost everyone else was wrong. We don't say this to brag. We say it because it's important for understanding why you should bother to pay attention to us now.

America's Bubble Economy (John Wiley & Sons, 2006) accurately predicted the popping of the real estate bubble, the collapse of the private debt bubble, the fall of the stock market bubble, the decline of consumer spending, and the widespread pain all this would inflict on the rest of our vulnerable, multibubble economy. We also predicted the eventual bursting of the dollar bubble and the government debt bubble, which are still to come. Of course, back in 2006, our predictions were largely ignored. Two years later, they started coming true: the housing, private debt, and stock bubbles fell dramatically, causing the global financial crisis in late 2008.

How did we see it coming? Certainly not by looking only at current conditions, which, at the time we wrote the first book, still looked pretty darn good. In fact, real estate prices in 2006 were close to their record highs. And with home values high and credit flowing, American consumers were still happily tapping into their home equity and credit cards to buy all ...