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Can you review the original predictions in “America’s Bubble Economy” and compare those forecasts with what we’re seeing in the markets today?

Robert Wiedemer

Aftershock Investor Book
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Video Transcript

So one of the things about the books I wrote is that people sometimes look back at them and say, "Hey, Wiedemer everything looks pretty good now, you were wrong!" Well again, back to the original thesis of the book. You have four bubbles: stock, consumer spending, private credit, and housing and those four bubbles work to boost the economy. At one point we said one of those bubbles will pop and it will be housing. That will bring the other four down and the response is going to be the government will build up a massive government debt bubble and a massive dollar bubble, or money printing, and that's exactly what happened. Exactly, what we predicted... happened. So to say that everything is fine, but to not look at the reason it is fine, which is what we predicted, is to miss the entire point of the book. What we're saying is this will be the reaction. What we're also saying is that it won't work long-term, you're just pumping up more bubbles with more bubbles and those will pop. The biggest bubble of all being that dollar bubble, because the government debt even though that's a little more tangible like... "Oh, each of us have $50,000 in debt"... the reality is as long as you can print money without "creating inflation or upsetting the markets" you can really borrow a lot of money, right? Because all the Fed has to do or the Federal Government has to do is just issue bonds and the Federal Reserve buys them with printed money. This can go on for a long time. So really the biggest, baddest bubble of all, so to speak, is that dollar bubble. That's the last one. When that pops, it all goes. Of course, people could relate that bubble especially though to gold, which is... I guess... makes a lot of sense... is they sort of see us printing a lot of money and you can see that gold can do very, very well once that pops. Now again, people say that will never pop, but we all kind of know that's not true, that's back to that cheerleading of really hoping to avoid that it ever will cause a problem. It's more like somebody trying to get away with a crime. I mean, if you really think of it that way.

They don't really think about getting caught. Think of Enron, think of Madoff, those guys knew something might go wrong. In fact, Bernie Madoff said, "I knew this day will come" -- when you finally get caught. When they're really doing it for the years before what they really did was just not think about it. They didn't think about an exit plan. They didn't think about what's going to go on. They just said, "This is what I got to do, I've got to keep my Ponzi scheme going." Enron had to keep it's funny accounting going. We've got to keep our funny accounting going, printing money, because if we don't it all collapses right now. So what we do is just say, "You know what? I'm not going to think about it." In fact, that's very often the most common reaction I get to my presentations now is they'll say, "Great presentation, Bob. Can't disagree with what you say and I sure hope you're wrong" but that's all it is... I hope you're wrong. That's what it really amounts to. That's how you get that biggest bubble is we... we're just, hopefully, denying the fact that printing money won't cause problems. We know it really will and we're just not thinking about it, but once it pops... that's the biggest one of all. That's what, of course, makes gold such a very good investment. Now, it also will hopefully force changes amongst our economy. We're going to focus more on productivity, because I certainly don't want things to blow up and melt down. What I want is for our economy to be built on productivity growth and productivity gains, rather than financial engineering, which never works and ultimately makes it harder to increase productivity, which is the real source of all wealth in our country. Certainly, we have done it before and we will do it again. I am very optimistic that we'll be able to get through this, but it looks like what we're going to do is instead of making the change sort of rationally, we're going to kind of hit the wall first and be forced to make the change. Still works, a little rougher way to do a change, but I think that's how we're going to do it.