Wednesday, January 30, 2008

CRASH PROOF by Schiff (Review)

Book: Crash Proof: How to Profit from the Coming Economic Collapse
Authors: Peter Schiff, John Downes
Subject: Financial

Review by Robert Jackson

Peter Schiff's CRASH PROOF is an easy-to-read narrative that gives the author's prediction of the coming collapse of the American standard of living and his prescription of how to safeguard or even enhance your material well-being as it unfolds. Schiff's background is president of an investment fund group and being the contrarian prognosticator on several cable television business programs.

The book is laid out in 2 parts, the first two-thirds describing the macro economic trends to support his prediction and the last third covering his advice to readers on how to thrive in the midst of a crumbling American economy.

My introduction to Peter Schiff was through You-Tube as I watched him on a cable business show accurately predict the housing bubble collapse we are now experiencing even as his position was being ridiculed by the other talking heads on the show. After reading another review of this recently released book, I decided I wanted to read it for myself to find out what his insights were on the present growing global financial crisis. The book is easy reading and interspersed with amusing metaphors that make his analysis understandable to readers without deep financial literacy.

Schiff begins by laying out background knowledge in understandable terms. He explains money, savings, consumption, investment, inflation, the housing bubble, the trade deficit and the other vocabulary in a way a neophyte could understand. He then explains how the American economy has evolved to its present condition citing the theories of classical economists such as Say and Mises. In an amusing metaphor, he compares the American economy to an inhabitant on a deserted island with a few other Asian inhabitants, making it clear to the reader that if the Asians are catching cleaning cooking and serving the fish, the American is not an "indispensable" member of this economy as the "consumer of the meal." For those of us with a good memory of the 1970's, he makes a good case for the return of "stagflation" which is characterized by rising prices even as the economy shrinks in size, two conditions that are not supposed to happen together in the models of Keynesian economics.

Speaking in the most general terms, Schiff's solutions lie in getting your personal wealth out of the U.S. dollar. His book goes into some detail (including offering his own investment group as agent to make these investments for you). For the most part, he's addressing people who do have some wealth as opposed to people who are already deep in debt or in dire straits. But he does offer some common sense advice usable even to penny savers.

The book was written some months ago at the peak of the housing bubble and well before the alarms in the banking sector that began happening this past August. So we are treated to his accurate analysis of the collapse of the housing bubble as confirmation of his insight. Still, the window has not closed on his advice though the opportunities he's talking about could disappear quickly in the short months ahead. Overall, I can recommend "Crash Proof", and will continue to find it handy as an introductory reference of how to invest in some non-mainstream ways.


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