Bests & Worsts Reviews from Amazon

Here we have yet another book claiming that its authors alone have discovered the key to our economic problems and offers as proof the fact that they got it right once, in their previous book. And to make sure that you understand that, they remind you every few pages. The history of economic & stock market predictions is filled with the names of people who got it right once, then proceeded to crash and burn. I could name some of them but out of kindness will not do so here. Is there going to be an "aftershock" equal to or greater than the 2008-2009 downturn in terms of economic devastation, beginning sometime in 2013-2015 or so, as the authors claim? Darned if I know. Darned if anyone else knows for sure, either. A number of things do point in that direction, and the authors may be proven correct. But bear in mind that in 1946 a lot of things pointed in the direction of the Great Depression resuming: the stimulus provided by the war spending was ending; the government had accumulated a huge debt load; much of the developed world was devastated and financially broke; all the military personnel would return home to find few if any jobs available. In Chapter 9 of this book the authors describe how economics can be made more of a science. Specifically, "numerical simulation models" can be developed to make much more accurate economic predictions than can be done today. This works to some extent in weather prediction, but weather lacks the irrational human element which is ever present in economic activity. Some improvement in economic prediction may be possible, but consider the following. If there were any way to predict the economy with much certainty, that way could be used to predict the course of the stock market with enough accuracy to make a great deal of money. Soon, nearly everyone would be using this method and winning all the money in the stock market. But if nearly everyone is winning, how could there be enough losers to provide money to the winners? Obviously there could not be; that is why there never can be any way to predict the economy significantly better than we are able to right now. But... what gives with all this economics stuff? What is really going on? Quite simply, economic activity is a result of the laws of mass human behavior. The authors are correct that there are plenty of bubbles in the economy and the stock market. The term "bubble" is simply another word for a mania, or excessive greed, one of the oldest mass phenomenona known. When a big one one gets going, nearly everyone gets on board, and no one is able to convince the majority that the mass speculation will end badly. Usually it does end badly, but not always. The World War II debt bubble deflated with hardly any effect at all. When the internet bubble ended in 2000, the NASDAQ suffered greatly but the overall economy had a more or less "soft landing". Will we ever fully understand the laws of mass human behavior? I don't think so. For us to determine and understand these laws would be something like a typical cat, on its own, understanding that riding in a car is safe and fun. The work of R.N. Elliott is probably the best that anyone has ever done in describing these laws, but there are far too many amibiguities and far too little precision in his work for it to be of any practical value. He formulated his laws in the 1930s and no one to my knowledge has been able to improve upon them significantly since then. Every financial newsletter writer knows that there is a nearly guaranteed profitable market for the purveyor of bad news. Maybe the authors will enjoy a good living by selling to enough people the specific advice that is missing from this book. After all, timing is everything when you are insuring your future by selling your house and buying hoards of gold. Update Oct. 10, 2011: I should have said something about the authors' claim that gold will skyrocket when stocks tank. A careful study of history will reveal that nearly every time that gold has made big gains, stocks have also. When stocks have tanked, gold almost always has declined. It appears that during a selling panic, people sell even gold to raise cash. I would not bank on that phenomenon reversing. Update May 11, 2012: The following may be of interest. You can find the article via net search of the following title. "Fed study rejects standard explanations for housing bubble" Updated: May 7, 2012 12:33 PM EDT "The authors, who include senior economists at the Boston Fed, list what they call 12 'facts' about the mortgage market that support their view of the causes of the foreclosure crisis... the authors conclude that the expansion of easy mortgage credit that led to the foreclosure crisis was simply the result of an asset bubble -- the same as occurred with Dutch tulip prices in the 1600s, with U.S. equities and Florida land in the 1920s, and even with Beanie Babies in the 1990s. Prices went up, the authors say, because people believed they would."