Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown, 4th Edition

Preface to the Fourth Edition of Aftershock

Judging from the stock market in 2013 and 2014, as well as the outlook 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 doubled the national debt from $9 trillion in 2007 to $18 trillion in 2015, pumping up the government debt bubble. And even more stunningly, it has increased the U.S. money supply by an unthinkable 400 percent (from $800 billion in 2008 to more than $4 trillion as of early 2015), 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 extent. This was most clearly ...