Friday, November 25, 2016

Book Review: The Road to Ruin

Book Review: The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis, by James Rickards, 2016, 301 pages.

The Road to Ruin is Rickards’ fourth book.  I have read all four and I have learned plenty from each.  Consider this an abbreviated review, as nearly every page in my copy of The Road to Ruin is marked with notes.  

I recommend The Road to Ruin to anybody who has a financial interest in the future.  I think James Rickards is closer than most in his assessment of our current debt problems and possible scenarios of the pessimistic type.

The Road to Ruin, released this month, is an up-to-date, pre-election review of monetary policy and how said policy will trigger a financial crisis far larger than those “foreshock” crises in 1998 and 2008.  The author explains, from multiple perspectives of established monetary theories, the new complexity theory, and in practical terms how the crisis is predetermined and how it will be too large for the American government and the Federal Reserve Bank to contain.  

The next one will impact the globe.

You’ll get a review of policies and laws that have set the table for problems in our near future.  You may even see these as part of premeditated plan by global elites.  

You’ll review the two major “Foreshocks” that the author ties to the coming “Earthquake 2018” - the title of Chapter 6.  Chapter 4 was my favorite chapter.  The topic is the 1998 crisis, but what I liked was it was from the author’s personal experience in a firm that collapsed in that crisis.  He reported to the CEO and his story is one of great minds who didn’t see the flaws within their business model.  The collapse of Long-Term Capital Management (LTCM) almost brought down the US economy.  The author summarizes on P119: “The lessons of 1998 were not learned.”

Rickards says the Fed does not see the next crisis coming because they are using outdated models, and relying on flawed theories, that fail to recognize the leverage aspects of derivatives and the bubbles created with debt.  He explains in detail what the Fed is missing as their only reference point to crisis is the depression rather than the near misses of 1998, 2008, and others.  

Learning the theories of monetary policy is not like riding a bicycle.  At least for me.  This is what I like about reading the Rickards’ books.  In each he explains the policies and history in detail.  This gives the reader the knowledge necessary to then understand the author’s criticisms and predictions.  In nearly every case, but not all, the author supports his conclusions and predictions.  You can click over to my Book Notes to see my questions for the author.  These are areas where I am still unclear.

For example, the author makes a convincing case to buy physical gold in preparation for the coming crisis.  Early in the book he says gold may spike to $10k/oz - a near 10x jump.  He warns gold will be unavailable when the price jumps.  And he warns the government may shutdown the banks and market exchanges to stop bank runs and equity selling.  Later, he offers a suggested portfolio, “to preserve wealth in the coming collapse” (P289).  A trigger for the jump will be an unexpected crisis (a snowflake preceding an avalanche) and the introduction of hyperinflation.  The portfolio suggests 10% gold and 30% cash.   My questions on these points include:  1) I understand holding cash is for using it to buy on dips, but the one asset that is spiking is the one investment that will be unavailable.  2)  Holding that much cash in an inflationary situation would likely lead to panic-buying. (It would for me.)  3)  Holding that much cash in a system that may be closed with no warning is risky.  4) Why not buy 40% physical gold now if you anticipate a 10x jump and closed banks?  

As I was reading The Road to Ruin I kept questioning the publication date.  Why not release after the election to include expectations of a Hillary administration or a Trump administration?  Having finished the book, I now think the publication date was a great idea.  First, the problems Rickard’s presents are mostly monetary in nature, rather than fiscal. So they are problems of a one-degree separation from the White House.  Second, The Road to Ruin could be seen as a manifesto for an incoming administration that knows there is a problem but only sees insiders to ask for help.  I genuinely hope the Trump transition team is considering Rickards’ advice.  Intended or not, I saw many suggestions in Road to Ruin that are quite similar to statements Trump made during his campaign.  A reason to be optimistic.

Read The Road to Ruin today if you want a complete and comprehensive assessment of current monetary shenanigans, risks in today’s economy, and tomorrow’s likely challenges.

Click here to see my questions for the author and 9 pages of selected quotes from the book.

I’ve added this book to the Ushanka Library at the left.

You can buy the book at Amazon.

The author’s blog

1 comment:

Eric S. Mueller said...

I read his first two books. They were very good. In his second, he included a viable plan to put the dollar back on the gold standard.

I was reading in Stratfor yesterday about why they don't focus on the elections. While in the short term, we get very caught up in the personality contest, in the long term, the personalities matter less than the geopolitical circumstances. That could be why Rickards focuses only on the monetary. Hillary or Trump matter less in the grand scheme of things.