© Joe Roseman 2012

About the book - SWAG

The stunning rise in household, financial and government borrowing over the 2000-2010 period created a false illusion of prosperity. Central banks became convinced of their own ability to control the business cycle. Governments allowed (almost encouraged) institutions and households to act recklessly. Yet, the reality was that OECD economies had become distinctly more vulnerable and subject to shock. As that shock emerged, the lack of economic robustness within the OECD has resulted in the crisis that currently prevails.

True to form, what has been the government response to a problem caused by too much borrowing? It beggars belief to hear economists and politicians argue that more stimulus is needed to boost demand. The problem was created in the first instance by the creation of too many things. Too many houses. Too many SUVs. Too many flatscreen TVs. The false illusion of wealth allowed households to believe that they needed and should have all these new things, even if they did not have the income to pay for them. The problem has never been about a lack of demand. The problem has been about too much supply and the artificial demand that was created by excess borrowing to satisfy that excess supply.

The solution to the problem is not to re-inflate the bubble by boosting demand. But, governments are incompetent. Governments would rather do the economically wrong but politically right (to gain votes). Hence the OECD economies stand at the brink of a new inflection point where governments will force a redistribution of wealth via financial repression, money printing and the generation of inflation. The savers will be called upon to bail out the over-borrowed.

This book explains how this process unfolds and the type of assets that typically benefit as a result.