The Global Debt Trap E-Book

Claus Vogt

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 392

Veröffentlichungsjahr: 2010

Beschreibung

German bestseller about the best ways to protect oneself financially from the threats posed by government?s interference in the economy After the bursting of the real estate bubble, the U.S. pushed a monetary and fiscal policy that is, at best, blatantly wrong and, at worst, carries enormous financial risk. And because Washington knows this, America?s greatest weapon?its propaganda machine?has been called into service, diverting attention away from the fact that it was and continues to be government interference in the market economy that?s lead us to where we are now, namely at the end of one financial calamity and the beginning of yet another. A plea for the market economy, The Global Debt Trap: How to Escape the Danger and Build a Fortune details the cause of our current economic crisis and argues that political mismanagement endangers finances, health and, in extreme cases, democracy itself. ? Advocates the freedom of the individual and the capitalist economic system derived from it ? Foreword by Martin Weiss, bestselling author of The Ultimate Depression Survival Guide, by Wiley ? Other titles by Leuschel and Vogt: The Greenspan Dossier Every crisis offers opportunities for those who have prepared. The Global Debt Trap: How to Escape the Danger and Build a Fortune shows how to prepare for the aftermath of years of government interference in the market economy.

Leseprobe

Contents

Foreword

Introduction: The Global Debt Trap

Chapter 1: Why the Debt Crisis Was Predictable

Keynes versus Mises and Hayek

The Road to Serfdom

Dr. Greenspan’s Great Experiment

Whiskey for the Alcoholic

Failure without Insight

Nationalization as a Response to Burst Bubbles and the Shattered Dreams of Central Bankers

East Germany as a Model?

The Financial Arsonists Remain Vigilant

Are Falling Asset Values Good or Bad?

How the Objective Minority Saw the 2008 Recession

The Austrian School and Common Sense

The Brilliant Failure of the Keynesian Model

Despite Everything, Keynes Is Still on the Rise!

Politicians Want Us to Believe They Know What They’re Doing

The First Results of Mr. Greenspan’s Great Experiment

Chapter 2: Real Estate, Banks, Bubbles, and Debts

The Macroeconomic Impact of the U.S. Real Estate Crisis

Real Estate Price Rises Were Immediately Converted into Cash

Trillions of Dollars Flowed into the Consumer Economy

The Effect on Economic Growth Was Immense

Shut the Stable Door! The Horse Has Bolted!

Déjà Vu

Still an Issue: The Burst Property Bubble in the United States

What Next?

Poverty as a Consequence of Inflation—The Gap between Rich and Poor Is Becoming Ever Greater

Not “Poor through Work” but “Poor through Inflation”

Guilty! Jeremy Grantham’s View of the Debt Overhang

Four Ways to Reduce the Debt Overhang

Stimulus Programs: Everything Must Go!

The Biggest Government Stimulus Package of all Time—By a Wide Margin

The Invisible Effects of Visible Policies

A Free-Market Approach to Solving the Banking Crisis?

An Exemplary Liquidation

Let the Dinosaurs Die Out!

Another “Bad Bank”

Chapter 3: The Great Money Game

A Good Idea

History Reveals Many Different “Monies”

Gold and Silver Win the Day

Monetary Prices Must Be Market Prices

Fractional Reserve Banking—The Heart of the Inflationary Evil

Global Monetary Orders Come and Go—The Fall of the Berlin Wall

We Should Insure Ourselves Against These Major Risks

All Major Periods of Inflation Took Place in Times of Fiat Currencies

Alan Greenspan Understands the Connection

What Lies at the End of This Road?

Chapter 4: The Road to (Hyper)Inflation

The Deflationary Scenario

Consumers Are Massively Indebted, if Not Excessively in Debt

Huge Sums in Bad Loans Must Be Written Down—Deflation Is Only Plausible in a World Unable to Print Money

Keynesian Interventionists Control Policy and Debate

The Wise Men of Economics (the Wise Careerists) . . .

Bad at Economic Forecasting, Good at Script Rewriting

Why the U.S. Mortgage and Foreclosure Crisis Is Not “Over”

Escaping the Global Debt Trap—Inflation Forecast

An Exception: How Paul Volcker Brought 1970s Inflation to a Temporary End

Reliable Information and the Black Swan

The Specter of Deflation?

Quantitative Easing, or “Look Mom, No Hands! We’re Printing Money!”

U.S. Central Bankers Have Finally Lost All Inhibitions—The Turning Point

What Can a Government Do If It Wants to Spend More than It Has?

From Now On the American Government Will Pay with Freshly Printed Money

Is Zimbabwe the True Trailblazer?

European Currency Reform—A Fictional Retrospective on the Expropriation of Savers

Chapter 5: How Could It Have Come to This?

We Are No Clairvoyants, Either

Moral Hazard, an Invitation to Dance on the Rim of the Volcano

British Soapbox Oratory

Blackberries of Monetary Policy

Bernanke, Geithner, Gross, and President Obama—The Fish Stinks from the Head Down

Are You Genuinely Clueless or Are You Lying?

Why Do They Lie?

Timothy F. Geithner Caused the Crisis, Too

Bill Gross Calls on the Government to Guarantee Rising Bond Prices

Barack Obama Berates the Equity Markets

These Men Are Supposed to Save the World?

Merkel, Köhler, Steinbrück, and Others: A Sobering Look at Germany’s Saviors of the World

The German President and the Monster

“Top Economists” Applaud

Politics Can Seriously Damage Your Finances, Your Health and, in Extreme Cases, Our Democracy

The Supplementary Financial Market Stabilization Act—The Road to Arbitrary Expropriation

Who or What Truly Threatens the Stability of the Financial Markets?

Why You Should Be Afraid of This Government

Chapter 6: What Can You Do Now?

Tough Times for Legends—“In God We Trust; All Others Pay Cash!”

“Below Average”—Sir John Templeton

The Best Advice for Investors: Self-Reliance

Stocks

Are We Facing a Shift of Power toward Extremism?

Stocks and Inflation that Is Not Extreme

Stock Market Cycles And Homo Economicus

Excellent Opportunities for Flexible Investors

Do You Know How to Play Poker in the Stock Market?

What About Bonds?

Real Estate

Commodities—Clever Yet Incorrect Forecasts

The Most Attractive Market in the World?

Important Markets

Commodities Are a Must for Every Investor, Just as Equities Are

Arguments for a Continuation of the Commodities Boom

Those Who Buy and Possess Gold Have Many Enemies—A Tough Recommendation

Friend and Foe

Three Hundred Percent Profit Given Away, but Nevertheless the Right Decision?

The Gordon Brown Gold Indicator

The Coalition of the Enemies of Gold

The Bernanke Top

Hide Your Gold

A Curious Test Result

Chapter 7: A Future Retrospective

A Final Word of Hope

Notes

About The Authors

Index

Copyright © 2011 by Claus Vogt and Roland Leuschel. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

A German edition Die Inflationsfalle: Retten Sie Ihr Vermogen! was published by John Wiley & Sons in 2010.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Vogt, Claus.

The global debt trap : how to escape the danger and build a fortune / Claus Vogt, Roland Leuschel, Martin D. Weiss.

p. cm.

Includes index.

ISBN 978-0-470-76723-8

1. Finance, Personal. 2. Global Financial Crisis, 2008–2010. I. Leuschel, Roland. II. Weiss, Martin D. III. Title.

HG179.V65 2010

332.024'01—dc22

2010042166

To Our Children and Grandchildren

Foreword

In the days after the real estate bust of 2007, scores of pundits came out of the woodwork declaring that they had predicted the crisis. Still others made similar claims after the debt collapse of 2008, and again, following the sovereign debt crisis of 2010.

But how many analysts truly foresaw each of these three crises, wrote about them extensively ahead of time, carefully explained the causes, and clearly spelled out the consequences?

I don’t have a precise answer. But I do know that Claus Vogt and Roland Leuschel, the authors of this book, are definitely among them.

In their 2004 German bestseller, Das Greenspan Dossier, they exposed, in great detail, how the monetary policies pursued by the former Fed chairman were creating an unprecedented real estate bubble. They showed how the bubble would inevitably collapse. And they predicted how that collapse would lead to a series of financial disasters of unthinkable dimensions.

“When the U.S. real estate bubble bursts,” they wrote in Das Greenspan Dossier, “it will not only trigger a recession and a stock market crash, but it will endanger the entire financial system, especially Fannie Mae and Freddie Mac.”

That one sentence alone—plus their constant reminders throughout the book about the enormous magnitude of the expected crisis—gave readers an unambiguous forewarning of the precise sequence of events that followed:

First, the bursting of the housing bubble.Then, the worst recession and stock market crash since the Great Depression.Next, a near meltdown in the entire financial system.And finally, the near demise of Fannie Mae and Freddie Mac.

Indeed, not only were these two government-sponsored mortgage giants the primary victims during the debt crisis of 2008, they are also the two largest institutions whose troubles have most obviously endured after that crisis. Clearly, Vogt and Leuschel singled them out in their book for the right reasons.

The irony of this story, however is that Das Greenspan Dossier, although a bestseller in Germany, was never translated into English. So unless you happen to be an avid reader of German language treatises on international finance, you missed it.

I didn’t miss it—but mostly by coincidence: I happen to work closely with Claus Vogt because we were co-editing Sicheres Geld, the German edition of our U.S. investment newsletter, The Safe Money Report. So when Claus first brought Das Greenspan Dossier to my attention, my first question was the natural one “This book is about America and should be of intense interest to all American investors. So why wasn’t it translated and published in the United States?”

The answer: Although American books about Germany, Japan, or other countries are almost automatically translated into their languages, the reverse is not true: Foreign books about the United States are rarely translated into English.

It seems few in the United States seek out the opinions of overseas authors—let alone about the United States itself. Indeed, to find a time when American readers were measurably intrigued by the analysis of a foreign observer, you might have to go back to Alexis de Tocqueville and his Democracy in America, first published 175 years ago.

That’s a shame.

Foreign authors can shed fresh light on America’s dilemmas and suggest novel solutions that U.S.-based analysts might miss. Foreign authors do not suffer from the same biases; they rarely have the same academic or political turfs to defend.

Moreover, as I explain in a moment, these two authors, in particular, have talents and insights that help them rise head and shoulders above their peers abroad.

“Clearly,” I said to the authors, “we must not let this happen again! When you write your next book, revealing your forecasts for what’s likely to happen in the next phase of this crisis, we must find a way to get it promptly translated and made available to everyone in the English-speaking world.”

Fortunately, John Wiley & Sons, which has published three of my books, agreed; and the product of that effort is in your hands right now—the fully translated and updated edition of the authors’ original German bestseller published in 2009—Die Inflationsfalle.

I was asked to review the translated manuscript, and I was pleased to find that the authors’ track record for prescient forecasts was reconfirmed. Indeed, in the relatively short time it took to find a U.S. publisher and translate the original, some of the authors’ key new forecasts were already beginning to unfold.

For example, in their 2009 German edition of this book, they wrote that the “cure” for the 2008 debt crisis that many sovereign governments were pursuing—massive bailouts—were worse than the disease. They explained that it would merely lead to a new crisis, this time in the debts of the sovereign governments themselves. In other words, the authors clearly predicted the sovereign debt crisis.

Sure enough, even as I was reading the manuscript, this is precisely what the world was experiencing or fearing—not only in financially vulnerable countries like Greece, Spain, or Portugal, but also in supposedly stronger economies like the United Kingdom, Japan, and even the United States.

The 2009 German edition of this book also predicted that the U.S. Federal Reserve under Chairman Ben Bernanke would embark on an increasingly more aggressive program of “quantitative easing”—outright money printing. This is precisely what the Fed has done. And right now, how much further the Fed travels down this dangerous path has become the defining policy issue of our time.

But the authors’ proven forecasting abilities are not the only unique strengths they bring to this work.

They are former banking industry insiders who never accepted the established economic theories that prevail in their world. Instead, they are eclectic, independent thinkers, drawing heavily from one of the few schools of thought that can logically explain the true causes and consequences of the busts we are now experiencing.

They fully understand—and explain—what money really is, what our governments have done to abuse it, and what the ultimate cost could be to society.

They are also ardent students of one particularly extreme boom-and-bust cycle that most government officials would prefer to forget: the rampant abuse of money printing presses in 1920s Germany, the destruction of the German currency and all of its terrifying consequences. More so than most other German authors, they are vividly aware of how that singular episode unfolded and the lessons it can teach us today.

Most important, the authors are major advocates for everything that has made the United States the envy of the world. Mr. Vogt writes weekly to 500,000 American readers to convey his views. And Mr. Leuschel was the co-author—along with Congressman Jack Kemp—of the German bestseller, Die Amerikanische Idee [The American Idea]. This book was translated into French and Dutch and became a bestseller in Belgium. An important chapter of this book was dedicated to the idea of sound money. In following Ludwig von Mises’s ideas, the authors tried to convince European readers that a return to growth and full employment was only achievable with sound money and tax cuts (Kemp-Roth Bill in 1981). Both are ardent critics of today’s U.S. policy, particularly under Fed chiefs Greenspan and Bernanke. But both have always been passionate supporters of America.

Looking ahead, no one can predict the future with precision. But Claus Vogt and Roland Leuschel provide a clear vision of what’s possible. If you want to protect and grow your wealth even in the worst of times, heed their warnings and seriously consider their recommendations.

Martin D. Weiss, PhD

Introduction

The Global Debt Trap

Nearly every advanced industrial nation on the planet is ensnared in the greatest debt trap of all time.

The debt trap is not a far-off danger that we can worry about some other day. Nor is it merely a concern for armchair theorists.

Quite the contrary, the debts are so large, so widespread, and so deeply entrenched around the world that virtually every policy decision by our leaders, every strategic move by investors, and every financial choice by billions of citizens is influenced, constrained, or driven by the need to compensate for—or the desire to escape from—the great trap that these debts have created.

The most recent 15-year sequence of events provides the best historical evidence.

First came the tech boom and bust.

In the mid-1990s, mostly thanks to aggressive money easing by U.S. Fed chairman Alan Greenspan, U.S. technology stocks enjoyed a massive bubble that culminated in an equally massive bust in the year 2000.

In the wake of the bust, the Fed chairman, vividly aware of the debt trap, feared the market decline would set off a deflationary debt collapse. So he eased money even further, engineering America’s lowest interest rates since World War II.