Bonner, William and Addison Wiggin. (2003) Financial

Bonner, William and Addison Wiggin. (2003) Financial Reckoning Day.

The idea of a 'soft depression' may seem oxymoronic to the reader's eye, much like 'jumbo shrimp' or 'a sure return' on your investment. A soft depression, however, is not another economic term a downturn in the economy less onerous upon the population than a 'hard depression.' Rather a soft depression is a depression that is based in a multitude of historical and demographic as well as economic factors that can cause a growing instability in the economy over time, rather than a quick, harsh decent into economy misery.

In fact, a soft depression, quite unlike a 'soft fall' is often much worse in terms of its ramifications than a short, sharp shock of a quick depression, much like drowning rather than a death by a firing squad, to use the type of metaphorical language so beloved by the authors William Bonner and Addison Wiggin of Financial Reckoning Day: Surviving the Soft Depression of the 21st Century.

Furthermore, the two authors stress, soft depressions have occurred before and will occur again, so investors and historians alike must expect and prepare for them. It is tempting to view one's own nation and one's own financial situation as historically unique. However, this book attempts to personalize the business cycle in a way that is easy and understandable for readers looking for investment advice, yet also to place the economic data of the moment in a world-wide historical and economic context, showing that 21st century America is part of a larger history and world environment that individual Americans -- and their financial advisors -- are often unaware of, willfully or not.

Bonner and Wiggin are noted as investment advice mavericks, rather than advocates of conventional wisdom, one of the things that make this book so interesting. They attempt to reconfigure and recenter the reader's understanding of the business cycle's recessions and depressions in such a fashion that the reader and potential investor does not view the recent shifts in technology and the globalization of the world's markets, as occurred during the 1990's and first part of the 21st century as permanently altering the nature of the business cycle, which they stress still remains unchanged in terms of the factors that affect its development.

The first chapter of the book is entirely devoted to an analysis of the recent Internet bubble and burst, which Bonner and Wiggin blame partly on the financial media industry generated by the World Wide Web, causing mob speculation and heady, overly zealous investment advice from so-called financial professionals with specious credentials -- all factors that they parallel with 1929's dissemination of hysterically optimistic investment predictions and advice. Although the author's language is peppered with many cliches, such as "the world never works as people thinks it does," the two men paint a fairly accurate picture of how things were during the height of Internet commerce. (3)

At the time, attitudes were so hubristic all common sense was forgotten. The authors take particular delight in taking shots at George Gilder a kind of guru of the new, technologically wealthy elite famous, whom became famous during the bubble and lost all of his money in the bust. Gilder's ignorance of price economics, say the authors, were the source of all his troubles. They use Gilder and Alan Greenspan both as cautionary tales of what cannot reoccur again, lest a similar boom and bust afflict the national economy.

The authors also take particular delight in deflating hubristic 'uni-theories' of history that is theories that attempt to explain all of history and all of human behavior with one simplistic paradigm. Chapter Two takes particular aim at the historian Francis Fukuyama's now infamously inaccurate proclamation that the end of the Cold War was to mark the end of human history for all time. As for their own advice, the also authors offer a number of proclamations that seem sweeping in their nature, but substantiate their generalizations as good advice and, with customary good humor, admit that they could be wrong. At least the authors temper their advice by admitting that financial advisors can never be totally relied upon, as was clearly shown during the Internet boom and bust. Even Alan Greenspan, had to "explain why he didn't know what had gone wrong," despite the Federal Reserve chairman's noted desire to portray himself as infallible and unflappable even under the worst of circumstances. (4)

One of the first guidelines these two men offer to the potential investor is that in today's economy, there are no more sure things, no true and tried blue chip stocks, and "the buy and hold strategy is a myth." Stocks may tend to become overpriced in today's information-happy climate and conspicuous climate of consumption but will always return to a mean, true value, despite initial heady speculation. Although the world's monetary system is growing increasingly complex when you try to make forward projections, they ultimately recommend tried and true strategies as buying gold -- perhaps one reason why the inventor of paper money, John Law, the father of the so-called 'Mississippi Bubble' and the engineer of the first stock market bubble is also eked out for particular approbation in Chapter Three of the text.

Overall, after reading this book, one is likely to be cautious about investing in the future, even in gold, in anything in America. The soft depression will only grow worse, despite signs that the economy is improving slightly. According to the author's projected cycle of bear and bull markets, it will be another decade or so before we see another bull market. The authors do not predict this upon past, predictable stock market performances however. They cite demographics behind their reasoning. For instance, given that the average American's maximum salary is reached at age forty-six at present, and afterwards people begin to start selling stocks to prepare for retirement, American's aging population will no longer be contributing to the stock market's push upward. A similar phenomenon, they said, caused the recent economic downturn in Japan.