Wednesday, February 9, 2011

Book Review: John Reed's Hyperinflation

I wrote this awhile ago.  I just started a new job, hence the lack of activities recently.  Anyway, here it is.

When I found out that John T Reed was writing a book on Hyperinflation and Deflation, I was really excited.  His book, Succeeding, was a true self-help book that focuses on working hard, saving money, and doing the right things.  He writes clearly, with a minimum of flowery language, and includes checklists and other tools to help readers implement his advice.  His preview articles on this subject promised unconventional advice on coping with currency fluctuations.

I pre-ordered 2 copies, and they arrived right after the release date.  The book starts off with a review of the current state, a history of hyperinflation and deflation, and then Reed's financial countermeasures.  The book is clear and well-written, with Reed's characteristically critical tone.  It is an engaging read.

If you have read Laurence Kotlikoff's The Coming Generational Storm: What You Need to Know about America's Economic Future, then you are familiar with the scale of the US financial liabilities. [IE, The US owes more in current and future obligations (Medicare/Social Security) than it will ever have the money to pay off.]  In fact, Reed cites Generational Storm as a major source in the book.  However, if anything, Kotlikoff understates the problem, if that was possible, as Reed made abundantly clear.  The only saving grace for the US is that the rest of the world is worse off than the US.  Conversely, the US's critical economic position means America will amplify the economic crisis and spread it to the rest of the world.  Regardless, the 'flations are coming soon, and all investors need to hedge the 'flations.

Reed's financial countermeasures are definitely unconventional.  He explained in great detail his reasonings, and cited multiple sources to back it up.  His chapter on precious metals goes against most writings on the subject [of both pro & con], but will help you avoid trouble with future legislation and law enforcement.  The current brouhaha over the 1099-Misc. $600 requirement (Obamacare) is just a portent of the negatives of a PM-only strategy.  Reed is not avoiding PMs altogether, but is serving as a corrective against the lazy-thinking behind a PM-only strategy.  In a 'flationary environment, governments inevitably restrict usage of precious metals instead of currency.  Therefore, the prudent investor has to rely on other countermeasures to adequately hedge against the 'flations.

Every prudent investor needs a copy of John Reed's Hyperinflation & Deflation.  His book is still timely and will help you survive the 'flations.
I wrote that 4 months ago (Sep'2010).  Since then, the economy has improved slightly, making 'flationary concerns less pressing to most of you.  However, the fundamentals has not changed.  The US Dollar is still unsound.  As Reed recently commented, the current debt ceiling debate in Congress is a good opportunity to fix our problems, but that Congress will sadly squander.  With the improving stock market, it is a good time for many investors to diversify their recovered portfolio into the other assets Reed recommends.  Now is the time.  Like the Chinese saying, "Short pain is better than long pain."

For all readers, Fernando Aguirre's The Modern Survival Manual: Surviving the Economic Collapse is a good complement to Reed's Hyperinflation.  Aguirre provides a good ground-level view of an economic collapse, and gives you a good understanding of the interplay of recession, hyperinflation, and deflation.  Aguirre offers other good tips on preparing for a 'flationary future.  His blogs are good to keep up with.

For readers interested in the academic background on the American debt obligations, Generational Storm, though dated (2005), still offers a good backgrounder.  It explains the math, too.  Kotlikoff's recent works could be good reading, too.

No comments: