John Wiley & Sons recently translated and published Claus Vogt's and Roland Leuschel's German bestseller Die Inflationsfalle for the English speaking audience with a new title of The Global Debt Trap: How to Escape the Danger and Build a Fortune. This is Vogt's and Leuschel's second book collaboration and probably a continuation of their first venture, 2004's Das Greenspan Dossier, another German bestseller which was never translated for the American reader that predicted the 2008 real estate bust and subsequent market crash. The authors are steeped in the Austrian School of economics tradition and it reflects in their outlook and writing. Although I don't agree with a lot that they say, they are smart people and penned an interesting, but incomplete read.
If you aren't familiar with the Austrian School of economics, it basically believes in the free-market economy, going back to the gold standard and the elimination of the central banking system. Think Ron Paul. Throughout the book the authors throw intellectual Molotov cocktails at the Keynesians, specifically Alan Greenspan and Ben Bernanke, and, state specifically that they have lead us down the road to hyperinflation, just like in Zimbabwe during the last decade or in Germany in the 1920's. As the authors write: "No one can pinpoint precisely when we will witness the endgame of this unlimited money supply explosion and debt orgy. But when lying sleeplessly at night, any thinking economist, no matter how sanguine, must know the so-called global monetary order is essentially unrealistic and unstable - that sooner or later, it will come to an unpleasant end.".
When will this unpleasant end happen? They don't give a timetable, but they feel it is going to happen sooner rather than later. Their first book Das Greenspan Dossier came out in 2004 and the real estate bubble burst didn't occur until 4 years after publication. That same 4 years was also accompanied by a cyclical bull market for equities. You would have missed out on a lot of profits if you were out of the market during that time. It only goes to prove that it's tough to time the market, but the next disaster that they are predicting will be worldwide in nature and as they summarize so succinctly, "In the final analysis, we are at a dramatic historical turning point - one that may rival the collapse of the Soviet Union in its scale and extent.". What they are calling for is a new world order.
That's the gist of the first half of the book, and I found their spin on things very provocative because I too believe that there is too much consumer and sovereign debt in the system right now. Something has got to give, however, I don't see the America and free world as we know it turning into some sort of anarchistic state as the authors suggest may happen. The first part of the author's thesis in The Global Debt Trap proved compelling, but the subtitle for the book is How to Escape the Danger and Build a Fortune and this is where I feel Vogt and Leuschel came up short.
Roughly the last third of the work is devoted to helping the reader reap big rewards when the financial Apocalypse comes, but I never felt like there was any safe place to put my assets if indeed I had anything left after the massive hyperinflation that is supposedly coming in the way the authors describe. They suggest putting 25% of your assets in gold, but also caution that when the central banks begin buying gold, it will be time to bail on that asset class, so gold is not something you can hold onto for the duration. Vogt and Leuschel also warn that the United States government confiscated gold from the public during the Great Depression; so spread your bullion to other countries, most notable Switzerland in case that scenario unfolds again. Easier said than done.
One area they felt that wouldn't necessarily be safe, but the lesser of all evils, is to invest in large cap multinational securities, because after the market crashes, these companies are the most likely ones to survive and their prices will levitate after the market craters and begins to rise again. I just thought there were too many holes in their suggestions and they tended to contradict themselves at times when it came to preserving your finances. The authors also didn't give concrete examples of what to invest in other than generalizations like when the market is sinking, use inverse ETFs. The Global Debt Trap is a good book, but not a great book. I have read other publications by writers influenced by the Austrian School of economics that were much better, but maybe that's because they didn't paint so bleak a picture of the future.