There was at least one cottage industry that boomed in the immediate aftermath of the 2008 financial crisis: the sale of investment advice to people preparing for economic Armageddon. A glance at some of the book titles of the time reveals its M.O.: Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown; Crash Proof 2.0: How to Profit From the Economic Collapse; The Day After the Dollar Crashes: A Survival Guide for the Rise of the New World Order. These fear-mongers’ business model was exemplified by a viral “End of America” online video with which investment advisor Porter Stansberry parlayed an alarming, dystopian vision into a pitch for viewers to subscribe to his newsletter for a “half-price” $49.55 per year.
These salesmen were—and mostly still are—selling the same basic narrative. They maintain that America borrowed itself into a deep hole and that rather than submit to a necessary painful adjustment it has let a large, invasive government bureaucracy print money to inflate its way out of a $15 trillion mess, a strategy that will create hyperinflation on a Zimbabwean scale, destroying whatever savings people have in dollars. Their advice varies in details but generally revolves around the same principle of avoiding fiat currencies, especially the dollar, and of buying commodities, especially gold. Any investor who does that, they say, will have the comfort of watching their investments grow while everyone else goes bankrupt.
The way that gold has tripled in value over the past five years, it’s tempting to conclude that these prophets of doom have been right.
But the other side of their predictions hasn’t held up so well. The underlying rate of inflation has stayed at or below the Fed’s benign 2% target rate. Interest rates, which the doomsayers tell us are destined to blow through the roof once the United States’ foreign creditors realize that the gig is up, have spent the post-crisis years at their lowest levels in history. And although the dollar weakened markedly in the first two years after the crisis, it has rallied sharply at moments of heightened investor panic, including during the worst moments of the euro crisis, when instead of collapsing into an End-of-America death spiral it shined as a safe haven for investors everywhere.
Still, my problem is not with these advisors’ investment forecasts. It’s hard to argue that the United States’ long-term debt obligations don’t pose a threat to the country’s prosperity or that the rising prices of oil and other commodities aren’t creating a looming inflation challenge. Rather, I take issue with the cold disconnect that lies between these people’s alarmist visions and the society they belong to. Who would want to live in the world they foresee? If the United States were to become Zimbabwe, the social meltdown and violent conflict would make life hell for everyone, including all those suburban worrywarts who’ve stashed gold coins in their lockboxes.
The world faces huge problems, many of which are detailed in The Unfair Trade, but to suggest that the only thing people can do is to watch a Mad Max-like society develop while protecting themselves with a stash of gold and other “crash proof” assets (guns, gasoline and food, perhaps), is to opt out of living. Gold, which essentially generates no income and provides no practical utility, is the ultimate pessimistic investment. It’s a bet that governments will never be able to fix our problems. And since government is the only means of collective organization we have, it is therefore a bet against human beings. If investors should invest with conviction, the conviction of a gold investor must be one of unwavering, absolute mistrust in human society. Now there’s a feel-good purchase for you.
My book offers a different proposition. Yes, The Unfair Trade also paints a bleak picture of the Big Finance-dominated, wildly unbalanced global economy in which we’ve trapped ourselves. But in exposing how we have disempowered ourselves by dismantling the government-run regulatory apparatus that’s needed to sustain the free market, its message is that we can and must regain that lost control. (Right-wing ideologues might find this contradictory, but recent history proves that free market capitalism works best when regulations prevent monopolists from garnering excessive market and political power.) Perhaps I’m as blindly idealistic as the terrified clients of Porter Stansberry are pessimistic, but I’m going to keep hoping that we learn from these mistakes and get to rebuild the kind of prosperous society that most of us want to live in.