Executive Summary xi Acknowledgments xiii Preface to the Third Edition of Aftershock xv Introduction: Your Guide to the Third Edition of Aftershock xix Part 1 The Coming Aftershock 1 Chapter 1 This Recovery Is 100 Percent Fake 3 Isn t a Fake Recovery Better than No Recovery at All? 5 If the Aftershock Has Not Been Canceled, Why Hasn t It Happened Yet? 7 Still Not Sure This Recovery Is 100 Percent Fake? 17 Don t Believe the Stimulus Has to Eventually End? There Is a Limit to What the Government Can Do 23 Wondering Why the Aftershock Hasn t Happened Already? Animal Spirits Are Keeping Are Keeping Us Going 24 Please Prepare Now 27 Chapter 2 America s Bubble Economy 31 Because Our Earlier Books Were Right, Now You Can Be Right, Too 36 Didn t Other Bearish Analysts Get It Right, Too? 39 How the Experts Got It So Wrong 41 Predictions from Ben Bernanke and Henry Paulson We Trust These Officials with Our Economy 46 Where We Have Been Wrong 47 Chapter 3 Phase 1: The Bubbles Begin to Burst 53 Bubbles R Us: A Quick Review of America s Bubble Economy 54 From Boom to Bust: The Virtuous Upward Spiral Becomes a Vicious Downward Spiral 60 Pop Goes the Real Estate Bubble 61 Pop Goes the Stock Market Bubble 68 Pop Goes the Private Debt Bubble 72 Pop Goes the Discretionary Spending Bubble 76 The Biggest, Baddest, Bad Loan of Them All 79 Chapter 4 The Market Cliff 83 The Market Cliff Won t Be Just a Down Cycle 84 Hitting the Market Cliff 89 The Last Resort: A Stock Market Holiday 94 When Is the Best Time to Get Out of the Stock Market? 95 Chapter 5 Massive Money Printing Will Eventually Cause Dangerous Inflation So Why Hasn t It Happened Yet? 99 What Is Inflation? 100 What Exactly Is Money Printing? 101 How Does Money Printing Cause Inflation? 102 Central Banks Gone Wild: The World Is Printing Money 104 Where Is Inflation Hiding? 109 1. Lag Factors Delay the Onset of Inflation 109 2. Government Statistics Underreport Inflation 112 3. Strong Motivation to Maintain the Bubble Economy Will Delay Most Inflation Until after the Market Cliff 112 The Arguments against Future Inflation Simply Don t Hold Up 114 This Is Not a Plan, It s a Panic! 121 The Real Problem with Rising Future Inflation: High Interest Rates 123 The Fed s Big Blind Spot: They Don t Understand Where Growth Comes From (Hint: It Doesn t Come from Rising Bubbles or Massive Money Printing) 127 When Will Inflation Begin? When Group Psychology Turns Negative after the Market Cliff 131 The Inflation Deniers Are Liars! 134 Chapter 6 Phase 2: The Aftershock 137 The Dollar Bubble: Hard to See without Bubble-Vision Glasses 138 The Government Debt Bubble Pops 160 The Aftershock 166 The Six Psychological Stages of Denial 167 Is There Any Scenario for a Soft Landing? 172 Chapter 7 Global Mega-Money Meltdown 173 The United States Will Suffer the Least 174 Think of the World s Bubble Economy in Two Categories: Manufacturing and Resource Extraction 175 How the Bursting Bubbles Will Impact the World 179 If the World s Bubble Economy Is Hit Harder than the U.S. Bubble Economy, Won t That Be Good for the Dollar? 188 If the Rest of the World Is Collapsing, Won t That Be Good for Gold? 188 International Investment Recommendations 190 Part 2 Aftershock Dangers and Profits 193 Chapter 8 Covering Your Assets 195 The Three Rules for Not Losing Money 195 These Rules Are Simple but Not Easy! 196 Long Term versus Short Term 199 Rule 1: Exit Stocks Well Before the Market Cliff 201 Rule 2: Stay Away from Real Estate Until after All the Bubbles Pop 207 Rule 3: Avoid Bonds and Most Fixed-Rate Investments as Interest Rates Rise 219 Where s the Best Place to Stash Cash? 221 How Long Must We Follow These Three Rules? 222 Letting Go Is Hard to Do 222 What Else Can I Do to Protect Myself? 225 Remember, Your Net Worth Is Not Your Self-Worth 228 Chapter 9 Cashing In on Chaos 229 Plenty of Profit Opportunities, but They Will Feel Quite Uncomfortable, Even Scary at Times 229 This Economy Is Evolving; Your Investments Should Evolve, Too 230 Three Goals of an Evolving Aftershock Investment Portfolio 232 Reducing Risk with a New Kind of Diversification 233 Timing Is Everything before the Bubbles Pop, but It Won t Be Perfect 247 Aftershock Investing after the Bubbles Pop: Gold, Foreign Currencies, and Foreign Bonds 248 Putting It All Together: Aftershock in Action 253 Chapter 10 Aftershock Jobs and Businesses 257 The Rising Bubble Economy Created Huge Job Growth; Now the Falling Bubble Economy Means Fewer Jobs 258 Conventional Wisdom about Future Job Growth Is Based on Faith that the Future Will Be Like the Past 260 Why Conventional Wisdom on Jobs Is Wrong 261 What s a Savvy Aftershock Investor to Do? 262 The Falling Bubbles Will Have Varying Impacts on Three Broad Economic Sectors 265 Should I Go to College? 274 Opportunities after the Bubbles Pop: Cashing In on Distressed Assets 275 Dig Your Well before You Are Thirsty 277 Chapter 11 Understanding Our Problems Is the First Step Toward Solving Our Problems 279 If You Don t Understand Why an Economy Grows, You Can t Understand Why It Doesn t Grow 279 You Need to See the Big Picture before You Start to Focus 280 Key Breakthroughs in the History of Economic Thought 282 Economics Needs a Breakthrough Big-Picture Idea like Geology Needed Continental Drift 289 So Why Aren t We Getting an Alfred Wegener or a Breakthrough Idea like Continental Drift? 291 Economists Have Become Academia s Version of Financial Cheerleaders 291 The Demands to Get Tenure and the Rewards of the Good Life after Tenure Have Delivered a One-Two Punch to Creative Economic Thought 292 Where to Now? Answer: Economics Needs to Move from Being a Collection of Competing Philosophies to Being a Unified Science 295 Four Key Elements for Making Economics More of a Science 297 Where Do We Stand Today in Making This Transition? 301 The Economics Profession Does Not Want to Make This Transition 302 The Solution to the Lack of Interest in Making Important Changes in Economics: The Coming Aftershock 304 Chapter 12 Our Predictions Have Been Mostly Accurate, So Why Do Some People Still Dislike Them? 307 It s Not a Cheerleading Book 309 It s Not a Complex Book (Although It Is Based on Complex Analysis) 310 It s Not a Crazy Book 313 It s Not an Academic Book 313 It s Not Suggesting Armageddon 314 It s Not a Reality-Denying Book 314 Us versus the Comforters: How Aftershock Stacks Up against Other Bearish Books 315 Epilogue: Say Good-Bye to the Age of Excess 323 Appendix: Are the Bond, Stock, and Gold Markets Manipulated? 327 Bibliography 339 Index 345
